It is considered the most important barometer on the health of the American economy: the monthly jobs report.
The report, which will be released on Friday morning, makes headlines around the world. It has the power to move global financial markets and affect the Federal Reserve’s policy decisions on interest rates.
During the campaign, President Trump called the unemployment rate — a part of the jobs report — a “hoax.”
The fact is that the people who put together the numbers — economists, analysts, number crunchers — take their job very seriously. The U.S. Labor Department’s Bureau of Labor Statistics, or BLS to economic nerds, has used the same method for calculating the unemployment rate since 1940.
BLS has painstaking protocols so the figures are not tampered with. Its officials lock the rooms where they crunch the numbers. They so prize secrecy that they put their trash cans outside their sealed offices so office workers don’t accidentally get a hint of the numbers before they’re made public.
The monthly report is based on two surveys. One is the household survey, which produces the unemployment rate, and the establishment survey, which produces the number of jobs added or lost each month.
Household survey = What’s the unemployment rate?
1. Each month, the Census Bureau contacts 60,000 households selected to reflect geographic, industrial and agricultural diversity. Households are put on a rotation, with some surveyed for 4 consecutive months, and others phased in and out each month.
2. It asks respondents 11 questions. The answers to the questions determine whether a person has a job of if they are currently looking for a job.
3. People with a full-time or part-time job are considered employed. People who don’t have a job and have looked for work in the past 4 weeks are considered unemployed.
4. Unemployed people are counted in the labor force.
5. The unemployment rate is the number of unemployed people as a percent of the total labor force.
6. For example, there were 7,635,000 unemployed Americans in January, and there were 159,716,000 Americans in the labor force.
7. 7,635,000 / 159,716,000 = 0.0478 or 4.8%.
8. Hence, the unemployment rate was 4.8% in January.
Establishment survey: How many jobs?
1. Each month, the BLS contacts approximately 147,000 businesses to get detailed information about employment, hours and wages. Like the household survey, not all the same businesses are surveyed every month.
2. The calls are made during the week that includes the 12th day of the month. In February, the 12th fell on a Sunday, so the “reference week” was Feb. 13-17.
3. People who have jobs are a part of what is called the “nonfarm payroll.” Farm workers are not counted.
4. You are included on the nonfarm payroll if you received pay during any part of the reference pay period. The reference pay period basically refers to the last pay cycle. A pay cycle can be the previous week or month.
5. The number of new jobs each month is the difference between the size of the nonfarm payroll in one month compared to the month before it.
6. For example, there were 145,554,000 Americans on the nonfarm payroll in January, and 145,327,000 Americans in December.
7. 145,554,000 – 145,327,000 = 227,000
8. Hence, there were 227,000 jobs added in January. (The BLS looks back at the data it collected for the prior two months and revises the jobs figures if more comprehensive numbers show an increase or decline in hiring).
— Jordan Malter contributed reporting to this article.
