The apparent contradiction can be explained when you realize there are two separate surveys being released.
One is called the payroll survey. It asks mostly large companies and government agencies how many people they employed during the month. This survey produces the number of jobs gained or lost. In August, the payroll survey showed that companies added 103,000 jobs, and federal, state and local governments cut 7,000.
The other is the household survey. Government workers ask whether the adults in a household have a job. Those who don’t are asked whether they’re looking for one. If they are, they’re considered unemployed. If they aren’t, they’re not considered part of the work force and aren’t counted as unemployed. The household survey produces each month’s unemployment rate.
So how did the unemployment rate drop in August, for instance, when jobs were added? The answer comes from financial columnist Terry Savage.
The rate fell because 368,000 more people dropped out of the work force, stopped looking for jobs. The work force “participation rate,” which peaked at 67 percent in 2000, has now dropped to 63.5 percent. It seems like a small percentage decline, but that number represents millions of people who are unemployed, under-employed, or simply have given up finding work.
Most news consumers tend to focus more on the unemployment rate, which derives from the household survey. But most economists generally prefer the broader payroll survey.
There are many other surveys that measure the economy. One that is sometimes referred to is produced by the National Federation of Independent Business (NFIB), which measures small business across the country.
NFIB uses evidence from its survey of 736 of its members.
Survey information gleaned from small businesses said the hiring stagnation is being caused by uncertainty about the economy and because of the upcoming national election in November.