fedgazette Roundup (2011-2015)

Minnesota employment has recovered—or maybe not

Brian Holtemeyer

Published July 27, 2011

Given all the hand-wringing over jobs, it might be surprising to know that there is considerable gray area over their actual number and how they are measured.

For example, by one measure, Minnesota’s employment remains about 4.4 percent lower than it was at the start of the recession. But by another measure, Minnesota’s employment has recently returned to its prerecession level (see Chart 1). More double talk from economists? Well, yes and no.

Employment Ch 1 -- 7-19-11 
Source: Bureau of Labor Statistics

The Bureau of Labor Statistics (BLS) collects employment statistics from two perspectives—households and businesses. To measure unemployment and labor force statistics, the BLS surveys 76,000 households across the nation and asks whether household members are employed, actively looking for work and so forth. The number of households surveyed in Minnesota is too small to get a clear picture of employment and unemployment, so the BLS combines the household survey with other information to produce state estimates.

Even with the additional information, there is a lot of uncertainty. For example, while the Minnesota unemployment rate stood at 6.6 percent in May 2011, the BLS reported that it is “90 percent confident” that the true unemployment rate is between 6 percent and 7.2 percent.

Measuring the number of jobs at businesses is somewhat easier. Here, the BLS surveys the payroll records of almost half a million nonfarm establishments across the country. While payroll employment has its own technical shortcomings, the much larger sample size is widely thought to produce more accurate estimates of state employment.

There are a number of differences between these two measures of employment, including how each treats self-employed workers, farm workers and people holding multiple jobs. But none of these differences appears to account for the large disparity since the start of the recession.

It turns out that household and payroll measures of employment have behaved differently in all states since the start of the recession—adding yet another complicating layer to employment analysis. The highlighted Minnesota bar (see Chart 2) shows that payroll employment has fallen 4.5 percent more than household employment. The difference is even larger in Arizona, where payroll employment is down 10.3 percent, whereas the household survey shows a mild 1.2 percent decline.

Employment Ch 2 -- 7-19-11 
Source: Bureau of Labor Statistics

North Dakota finds itself in the opposite position from Minnesota: Payroll employment growth has been substantially stronger than household employment. For Montana, South Dakota and Wisconsin, the two employment estimates have changed by roughly the same amount since the start of the recession.

Unfortunately, economists have yet to uncover why the two measures vary so widely. And until that matter gets resolved, Minnesota’s employment disparity will remain a tale of two surveys.