Jobs Added, Explained

On Friday, the Bureau of Labor Statistics (BLS) will publish its monthly Employment Situation Report, through which we will glean a snapshot of how the labor market and the economy are faring. Headlines across newspapers, TV, and the internet will announce the number of ‘jobs added’ to our economy in August. Here’s a quick and dirty guide to understanding this statistic:

What does the ‘jobs added’ number in all the headlines really mean?

Each month, the BLS measures the number of payroll positions in the economy. It looks at the number of people employed by each company and adds up those numbers across all companies. The number of ‘jobs added’ is simply this month’s total payroll number minus last month’s total payroll number.

Why do we care about ‘jobs added’?

Looking at payroll growth allows us to get a well-rounded picture of business growth, labor market growth, and employment growth. If businesses are hiring more people, they must be doing pretty well, and more hiring means that more people will be able to find jobs.

3 things to know about ‘jobs added’:

  1. The number of ‘jobs added’ is not equal to the number of new positions that didn’t exist last month. The number of brand new positions is most likely larger than the number of ‘jobs added’. By subtracting last month’s total payroll from this month’s total, the report captures payroll increases as well as decreases due to downsizing, companies going out of business, and other separations. Additionally, any positions that are left vacant for more than one month would count as a -1 when the position is vacated and a +1 when the position is filled again, meaning that some of these ‘jobs added’ could be jobs that already existed.
  2. The number of ‘jobs added’ is not equal to the number of people who are working this month, but were not working last month. There are two reasons for this. First, people with more than one job will appear on more than one company’s payroll, meaning it’s possible that all the ‘jobs added’ could be second jobs for people who are already employed. Second, there are people who work but are not technically employed, so they won’t appear on any payroll. This category includes people who are self-employed, independent contractors, and 1099 workers. This means that the number of people who began working in the last month could be higher or lower than the ‘jobs added’ number.
  3. The number of ‘jobs added’ doesn’t tell us anything about the quality of those jobs. Within this number, full-time and part-time jobs are combined, as are high-paying and low-paying jobs.

Historically, most jobs provided enough income for a family to live off of. At that time, measuring the number of jobs in the economy was a very good indication of not just of how businesses were doing, but also of how workers and families were doing. It seems that this is no longer the case. That said, it is still helpful for us to compare ‘jobs added’ month-to-month and year-to-year in order to get a loose sense of the direction we are moving in, as this number is still a fairly good indicator for business growth. To measure the health of the labor market for workers, we will have to do a deeper dive into the statistics.