Conflicting News in May PA Employment Report

As often happens, the latest employment situation report for Pennsylvania is a tour de force of opposing signals about the market. The household survey that estimates the number of people who say they are working and the establishment survey that reports the numbers of workers on payrolls could not be more at odds.

The household survey claims 24,000 additional people joined the ranks of self-reported employment in May compared to April, while the establishment survey found a drop of 9,200 workers on payrolls. Moreover, since May of 2012, the household survey shows a twelve month rise of 68,000 people who say they are working while the establishment survey shows a mere 4,700 increase.

The Pennsylvania household survey results mirror the recent national numbers to a large extent. For example, the twelve month gain in Pennsylvania employed was 1.1 percent, exactly the same as the national increase. April to May jumps in labor force in the state and nation were also very close in percentage terms.

Meanwhile, the figures from the establishment survey are quite bleak. The report shows data for ten private industry sectors. Pennsylvania employment in six sectors fell between April and May, two were basically unchanged and only two posted meaningful, albeit small gains-Education and Health and the "Other" services sector.

What to make of this disparate behavior? One explanation offered by some analysts is that many people have decided to become self-employed and are captured by the household survey while being missed by the establishment survey. That has some plausibility. There is anecdotal evidence that underground economic activity has increased during the long period of economic sluggishness. People working "off the books", growth in numbers and size of "flea markets" where new goods are sold, and cash transactions would account here. After all, with millions of illegal immigrants, many of whom are employed, what are odds that a big portion of that activity is not measured by the government’s normal methods?

There is also a question of accuracy of the surveys. The measurement problems inherent in household surveys and its self- reporting that are not as easily verified as are the establishment reports. On any case, there will be major benchmarking update at some point that will likely bring the surveys into closer alignment for a while.