Which Unemployment Numbers to Believe

The federal government’s monthly unemployment numbers are gospel, at least to the financial markets. But they are revised at least once, often twice, after they are issued. An early signal of what the federal numbers might be are the payroll numbers released by ADP (NASDAQ: ADP), which usually come out just a few days before the government’s monthly data.

Another set of figures from a respected source are those from Gallup, although the market does not seem to pay much attention to them, no matter how good the data-collection methodology. Gallup uses a random sample of 29,243 adults, which it canvasses once a month. The latest Gallup data runs counter to most expectations for weakening job growth. If the data are correct, the economy may add more employees than expected in June.

The research firm reported that:

U.S. unemployment, as measured by Gallup without seasonal adjustment, is 8.0% in mid-June, unchanged from the end of May but significantly better than the 8.7% for the month of June 2011. Gallup’s seasonally adjusted number is 7.8%, an improvement from 8.3% at the end of May, and down slightly from the previous seasonally adjusted low of 7.9%, measured in January.

One reason that measurements of employment do not match each other more tightly is that the periods over which the information is gathered are not common. The federal data represents the first part of the month it reports. ADP measures over a different period, as does Gallup. The readings, therefore, may have little in common.

No matter what the exact measurement period, the Gallup numbers are heartening:

Although Gallup’s unadjusted unemployment rate was unchanged on June 15, the 30-day average dipped below the 8.0% mark, to 7.9% or 7.8%, on five days in early June. This marks the first time unemployment has dropped below 8.0% in the 30-day rolling averages since Gallup started collecting employment data in January 2010.

Maybe numbers that almost no one pays attention to will be correct, and the clouds over the job market will begin to dissipate.

Douglas A. McIntyre