January 2014 US Unemployment Rate: 7.0% BLS or 8.6% Gallup

See Current Unemployment Rate for latest information.

Gap Between BLS and Gallup Data Growing

The U.S. Bureau of Labor Statistics (BLS) released the data for January. According to the BLS, the current “Seasonally Adjusted” Unemployment Rate for January 2014 (released Februuary 7th) is 6.6% down from 6.7% in December. But the “Unadjusted” Unemployment Rate is 7% up from 6.5%. So the unadjusted rate went up by .5% and the adjusted rate went down by 0.1%.

However, according to surveys by the Gallup organization Adjusted Unemployment was actually 8.0% in January and Unadjusted Unemployment was 8.6%. Supposedly, the Gallup and BLS surveys are using the same methods! Last month the difference was 0.9% but this month it has grown to 1.4%!

Adjusted Unadjusted
BLS 6.6% 7.0%
Gallup 8.0% 8.6%
Difference 1.4% 1.6%

 

So we have a major divergence between what Gallup is telling us and what the BLS is claiming and the gap is significant. Last month the difference between the BLS unadjusted and Gallup unadjusted was 0.9% this month the difference is 1.6%. See Is the Government Fudging Unemployment Numbers? for the comparison of Gallup numbers vs. Bureau of Labor Statistics numbers.

In addition according to Gallup the U.S. Payroll to Population employment rate (P2P), as measured by Gallup, was only 42.9% in November (meaning that less than 43% of the people in the county are working) down from 44.6% in July and 45.7% in October 2012. And in January the P2P had fallen even further to only 42%. In other words according to Gallup, the percentage of the entire population of the country that is working is decreasing but according to the BLS unemployment is going down. Decreasing P2P should equal higher unemployment not lower, unless the people are dropping out of the workforce and not even looking for jobs.

 

Current US Unemployment Rate Chart

unemployment_rate_Jan_2014

(Click for Larger Image)

If we compare the BLS unemployment numbers to their own employment numbers we can get an idea of what is really happening, unless they decide to have another major revision (read massive number fudging) like they did in December 2012.

In June 2013 the BLS said we had 136.769 million people employed (at least 1 hour a week) in November they say we had 137.942 million employed. So that looks good. A net increase of 1.173 million jobs. during that same period the civilian non-institutional population increased by 811,000.

To recap:

Unadjusted U-6 Unadjusted U-3 Adjusted U-3 Employment Civilian Population Net
December 2011 15.2% 8.3% 8.5% 133.292 Million 240.584 Million
December 2012 14.4% 7.6% 7.8% 135.560 Million 244.350 Million
January 2013 15.4% 8.5% 7.9% 132.704 Million 244.663 Million
February 2013 14.9% 8.1% 7.7% 133.752 Million 244.828 Million
March 2013 13.9% 7.6% 7.6% 134.570 Million 244.995 Million
April 2013 13.4% 7.1% 7.5% 135.513 Million 245.175 Million
May 2013 13.4% 7.3% 7.6% 136.383 Million 245.363 Million
June 2013 14.6% 7.8% 7.6% 136.769 Million 245.552 Million
July 2013 14.3% 7.7% 7.4% 135.577 Million 245.756 Million
August 2013 13.6% 7.3% 7.3% 136.002 Million 245.959 Million
September 2013 13.1% 7.0% 7.2% 136.612 Million 246.168 Million
October 2013 13.2% 7.0% 7.3% 137.523 Million 246.381 Million
November 2013 12.7% 6.6% 7.0% 137.999 Million 246.567 Million
December 2013 13.0% 6.5% 6.7% 137.753 Million 246.745 Million
January 2014 13.5% 7.0% 6.6%
2 mo. Change -0.4% -0.4% -0.1% 230,000 364,000

.230 -.364=

-.134

12 mo. Change -1.4% -1.1% -1.1% 2.193 Million 2.395 Million

2.193-2.395=

-0.202

So over the last 12 months employment has increased 2.193 million but the civilian non-institutional population (a fairly narrow measurement of population) increased by 2.395 Million so that results in a comparative net LOSS of 202,000. This agrees with to Gallup’s Payroll to Population (P2P) employment rate. So how can a decline in P2P possibly result in a decline in unemployment by -1.1% ? So even using the BLS’s own Employment numbers we can see that the Unemployment rate is not accurate.

Note: With all the scandals coming out of Washington these days, the key question of course is whether we can actually trust the numbers coming out of the BLS. I’ve been saying for a while that the unemployment numbers don’t match up with the employment numbers. In January 2013 the BLS decided to “fix” this problem. But rather than give us the real unemployment numbers they just went back to July of 1991 and simply changed the employment numbers. How the number of people employed could have suddenly changed that far back in history is beyond me, especially considering that they are supposed to come from reports from employers.

The change started small and grew to 738,000 jobs at the peak in December 2012. Yes, they simply added 3/4 million jobs out of thin air. This year they figured that it went so well last year they would go back and magically invent some more jobs… so in January 2014 another 513,000 appeared out of thin air. Supposedly after 3 months the final numbers are in and they can’t be changed but that doesn’t seem to stop them. Note that they say the “benchmarking” goes back as far as January 2009 but in actuality they changed the numbers all the way back to January 1978.  Somehow by calling it “annual practice” that makes it OK.

Here is how the BLS explains it:

Revisions to Establishment Survey Data

In accordance with annual practice, the establishment survey data released today have been
benchmarked to reflect comprehensive counts of payroll jobs for March 2013. These counts
are derived principally from the Quarterly Census of Employment and Wages (QCEW), which
enumerates jobs covered by the UI tax system. The benchmark process results in revisions
to not seasonally adjusted data from April 2012 forward. Seasonally adjusted data from
January 2009 forward are subject to revision. In addition, data for some series prior to
2009, both seasonally adjusted and unadjusted, incorporate revisions.

The total nonfarm employment level for March 2013 was revised upward by 369,000 (+347,000
on a not seasonally adjusted basis, or 0.3 percent). The average benchmark revision over
the past 10 years was plus or minus 0.3 percent. 

This revision incorporates the reclassification of jobs in the QCEW. Private household
employment is out of scope for the establishment survey. The QCEW reclassified some
private household employment into an industry that is in scope for the establishment
survey--services for the elderly and persons with disabilities. This reclassification
accounted for an increase of 466,000 jobs in the establishment survey. This increase of
466,000 associated with reclassification was offset by survey error of -119,000 for a
total net benchmark revision of +347,000 on a not seasonally adjusted basis. Historical
time series have been reconstructed to incorporate these revisions. 

The effect of these revisions on the underlying trend in nonfarm payroll employment was
minor. For example, the over-the-year change in total nonfarm employment for 2013 was
revised from 2,186,000 to 2,322,000 seasonally adjusted. Table A presents revised total
nonfarm employment data on a seasonally adjusted basis for January through December 2013.

All revised historical CES data, as well as an article that discusses the benchmark and
post-benchmark revisions and other technical issues can be accessed through the CES
homepage at www.bls.gov/ces/. Information on the data released today also may be obtained
by calling (202) 691-6555.

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