- The Washington Times - Thursday, September 9, 2004

The August jobs picture is better than it seems at first blush. Nonfarm payroll employment picked up last month, rising a respectable 144,000, following upward revised gains of 96,000 in June and 73,000 in July.

The August rise, the 12th in a row, was broad-based, extending across the goods and service sectors. Since January, payrolls have grown nearly 1.3 million, or an average 183,000 a month, keeping ahead of additions to the labor force.

The unemployment rate ticked down another tenth in August, to 5.4 percent, well below its cyclical 6.3 percent high in June 2003 and falling to its lowest in nearly three years. Production workers’ hourly and weekly earnings continued rising.

Though the recovery in payroll jobs continues, its pace has slowed since spring. But payroll jobs are not all jobs. To get a broader perspective on the employment situation, it’s necessary to fill in the major gaps in payroll data.

The government’s payroll survey is preferred by most economists over its monthly household survey of employment, mainly because of the former’s larger sample. But the payroll survey is less comprehensive than the household survey as it doesn’t include important economic sectors, notably workers in agriculture and the unincorporated self-employed. It also excludes private household workers, unpaid family workers, strikers, workers on leave without pay and hired workers who have not yet started their jobs, among others.

When the two important groups excluded from the payroll data — farm workers and the self-employed — are extracted from the household survey and added to the nonfarm payroll count, the employment picture for this year, and the last two months in particular, changes considerably.

The broader measure shows employment has grown by just short of 1.6 million since the beginning of 2004, or by 300,000 more than the incomplete nonfarm payroll data show.

Farm workers and the self-employed contributed about equally to the additional job growth. Overall, this averages out to an average employment rise of 225,000 monthly since January. The gap between actual employment and the economy’s noninflationary potential employment thus continues narrowing.

July nonfarm payrolls, as reported by the Labor Department, rose a tepid 73,000. Though agricultural employment did not improve, self-employment rose sharply, raising the adjusted employment total increase for July to a solid 230,000.

The improvement in last month’s payroll number after adjustment is even more dramatic. August agricultural employment rose nearly 50,000 while self-employment bounced up again, by 128,000. When these components are added to the reported nonfarm payroll number, the adjusted increase for the month becomes a rousing 319,000.

In sum, whereas the official payroll data indicate a recent slowing in job growth, when the data are adjusted to include omitted sectors, employment picture for the past half-year shows robust growth. The labor market continues tightening, and you can bet the Federal Reserve has looked beyond the surface of the nonfarm payroll data to draw its conclusions.

Republicans had been holding their breath waiting for the August employment report, the next to last before the presidential election. The economy delivered and brought in a respectable job number. The downtrend in unemployment continued. The sigh of relief was almost audible. A closer look at the current job market should bring a smile to their faces.

President Bush has said he wants to encourage an ownership society, with more people owning their own health-care plans, retirement accounts and small businesses. That means more self-employed, the very group that made a big difference in improving the recent job picture. Perhaps word is getting out.

Alfred Tella is former Georgetown University research professor of economics.

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