Gauging Employment: Is the Professional Wisdom Wrong? Comment and Discussion‪.‬

William Wascher: (1) George Perry has written a very interesting and provocative paper aimed at anyone engaged in analyzing and forecasting the U.S. economy. As Perry notes, analysts place considerable emphasis on the Bureau of Labor Statistics' release of employment data on the first Friday of each month, essentially because these data provide one of the earliest readings on the pace of economic activity in the preceding month. One difficulty in interpreting the data, however, is that the release includes results from two independent surveys, of households and of establishments, which often give different signals about the strength of the labor market. For example, in the last month for which data were available as this volume went to press (November 2005), the household measure of employment fell by more than 50,000, whereas the payroll measure increased by more than 200,000. Perry argues that analysts place too much weight on the monthly employment changes in the payroll survey and consequently too little on those in the household survey. In his view, analysts have misinterpreted the smoothness in the employment changes from the payroll survey as evidence of greater accuracy, because they have not taken into consideration some other shortcomings of that survey. Instead, according to Perry, forecasters would be better advised to average the monthly changes from the two surveys.