The creation of 20,000 additional jobs throughout Missouri in April appears promising for the state’s economy. But job creation is only one indicator of economic growth — one that some economists find misleading.
Missouri was third in the nation in job growth, the U.S. Department of Labor announced May 26. While the labor statistics are encouraging, they tend to fluctuate quickly and are not necessarily a true sign of economic development, said Ken Troske, MU associate professor of economics.
“I’d be very reluctant to make any extremely strong conclusions from a single number,” he said. “But a really big positive number is better than a really big decline.”
Columbia Chamber of Commerce President Don Laird said Columbia, which he described as “recession-resistant,” has a diverse economy centered on more than manufacturing firms. For this reason, Columbia rarely has massive changes in employment numbers.
“The diversity of our economy is centered around higher education, heath care and insurance companies,” he said. “Those are organizations that don’t usually have huge swings one way or another.”
Job growth is measured when the Department of Labor subtracts the number of jobs lost in a state from the number of jobs created. Jobs are lost when companies close or downsize and are created when new firms come to a state or existing companies expand to add more workers, Troske said.
Job numbers come from businesses’ payroll statistics. The Department of Labor’s Bureau of Labor Statistics also releases household survey numbers, which measure unemployment. Both can be used to measure job growth.
When economists measure job growth on a month-to-month basis, as the Department of Labor did for Missouri in April, they fail to consider events that might have altered the final number. Troske said when workers return from a strike, for example, the number of jobs may grow considerably.
Dave McDermott, a BLS regional economist in Kansas City, said the April number does not make adjustments for these isolated instances. For example, a worker on strike who works just one day during a pay period will count toward the final payroll numbers. If a striking employee does not work at all during the pay period, he or she will not be counted. Temporary workers are also included in the final payroll numbers.
Another BLS economist, David Doorn, said April’s job growth is only a preliminary number for Missouri and will be revised by the time May’s labor statistics are released June 18. The number can change as businesses submit corrections on their payrolls to the BLS.
“We will go back over the data, and it hasn’t been run through the ringer completely yet,” Doorn said. “But that doesn’t necessarily mean that it will go up or down that much.”
In February, the April data will be compared with employment numbers from nearly all businesses across the state. The April number is based solely on a random sample of companies, McDermott said, which can make it vary.
Doorn said the number of jobs created is already adjusted for seasonal changes in employment. In the summer months, the number of employed construction workers increases, while many school employees might be out of work.
A large and decisive presidential campaign issue, job growth is very important politically, though it plays a minor role in actual economic assessment, Troske said.
Still, Troske said politicians from both parties often spin BLS numbers to generate support for policies or to improve their images. Payroll job numbers differ greatly from those taken from household surveys, allowing for multiple interpretations of the data.
Troske said the household statistics suggest fewer jobs lost than the payroll numbers, which is why President Bush chooses to quote the household data.
“No one understands why these numbers are different, but given the level of economic activity that’s gone on in the country, these numbers seem to be at odds recently,” Troske said.
Despite the political uses for labor statistics, Doorn said job growth is typically a sign of positive economic changes, even if the numbers are somewhat imperfect.
“It’s a sign of economic growth because as jobs are being created, that pumps more money into the local and state economies,” said Kristi Jamison, spokeswoman for the Missouri Department of Economic Development.
Jamison also said businesses were growing in Missouri throughout the recession, but this growth did not offset the jobs lost in the state. She said only now is job growth catching up to business development.