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Are we underestimating the US job market?

Some argue that the most recent payroll survey, which shows a paltry gain in jobs, is underestimating the US job market.But the payroll survey is a more reliable marker of job growth than the household survey.

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Keith Bedford/Reuters
Job seekers fill out application forms as they wait to see recruiters at a job fair sponsored by the New York Department of Labor in New York, June 7, 2012. Karlsson argues that in comparison to the US household survey, the US payroll survey is a more reliable marker of short term economic trends.

Permabulls Brian Wesbury and Robert Stein argue that because the household survey say a much bigger gain (422,000) in jobs than the payroll survey's (69,000), the payroll survey underestimates the strength of the U.S. job market. That might have been plausible if that had been a consistent pattern, but that is not the case as the household survey showed significant drops in employment in March and April even as the payroll survey showed gains. In fact for the last 3 months as a whole, the payroll survey showed a bigger increase (279,000) than the household survey (222,000).

This illustrates that the household survey is more erratic and volatile than the payroll survey and that with regard to short-term economic trends, the payroll survey is more reliable. The household survey number could however  be useful if the household survey is consistently either stronger or weaker than the payroll survey than that would be reason to suspect that the payroll survey either underestimates or overestimates strength in the job market. However, when it comes to short-term economic trends, which is what Wesbury's and Stein's comments were about, then the payroll survey is more reliable.

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