The great jobs puzzle: Working hard or hardly working? ON JANUARY 10th the Bureau of Labour Statistics (BLS) reported some miserable jobs numbers: a net increase of only 74,000 in December. Wall Street had expected almost triple that number; it was the biggest such miss since 2008. In the previous four months America had created more than 200,000 net new jobs a month, convincing investors that a strong expansion was finally under way. Such optimism now seems premature. Some economists dismiss the report as an anomaly. Many people couldn't work in December because of the horrible weather. Moreover, the BLS revised up the pace of job creation in November, so the average of those two months, at 158,000, is probably closer to the trend for the last months of the year. The jobless rate actually fell, to a five-year low of 6.7% from 7% in November. Mark Zandi of Moody's Analytics, whose proprietary payroll survey had projected a gain of 238,000 jobs, predicted that data revisions in the coming months would wipe away the dip. The numbers are confusing. America publishes two jobs reports each month: one based on a survey of employer payrolls; another based on a sample of households, which yields the unemployment rate. For some time, the household survey has been gloomier than the payroll survey. Unemployment peaked at 10% in October 2009. Much of its subsequent decline has been driven not by job creation but by people dropping out of the labour force. Those who have given up looking for work are not counted as unemployed. The labour force participation rate has fallen from 65% then to 62.8%, its lowest point since 1978. Some of this is because the economy is weak and jobs are scarce: in December, the number of people who said they wanted a job but weren't looking for one jumped by 332,000. Many will presumably start looking again once job prospects improve. But much of the drop is structural, as ageing baby-boomers retire and the long-term unemployed end up subsisting on disability benefits. The household survey is also showing far less job growth than the payroll report: 1.3m in the past 12 months, compared with 2.2m (see chart). If the household data are adjusted to match the payroll survey's definition of a job (for example, by not counting the self-employed) the gain drops further, to 1.1m. Which is right? Economists typically trust the payroll survey more because of its larger sample. The household survey is based on a sample that is then extrapolated to the whole population. If the population turns out to be larger than the BLS thinks, its employment number will have to be revised up. But Ted Wieseman of Morgan Stanley, a bank, thinks the opposite is more likely, noting that population growth seems to be slowing. So perhaps the payroll count is too high. Its tally of small firms is particularly error-prone, since the BLS must initially guess how many new firms are being born and how many old firms are dying. This seems ripe for downward revision, given the softness in self-employment recorded by the household survey. More probably the discrepancy will simply persist, unexplained, and then go away. The payroll report recorded a more savage contraction in employment during the recession. Perhaps its recent performance is simply payback.