Every month, usually on the first Friday, the Current Employment Statistics program (CES) at the Bureau of Labor Statistics (BLS) publishes the Employment Situation report. There are a lot of details that go into the collection of the data, calculation of the statistics and creation of this report.

What interested me was the "Technical Note" in the report that related to sampling error. This relates directly to what we learned about confidence intervals in Chapter 8.

First, you need to know how the data is gathered. The BLS uses data from two surveys - the Current Population Survey and the Current Employment Survey. The CPS, also called the household data, is a sample of 60,000 households. The CES, also called the establishment data, is a sampling of the payroll records 160,000 businesses, which constitutes about 1/3 of all the non-farm workers. Those are two honkin' large sample sets! Each is a snapshot in time on the 12th of the month.

The BLS uses these data to calculate the size of the overall labor force and unemployment rate from the household data. The establishment data is used to estimate the number people employed in industry sectors such as construction, manufacturing, retail, education and government. They also calculate the average hourly and weekly wages each month.

The part that's relevant to our class is that this is a case of a estimating a population based on a sample. Therefore, when they say that the unemployment rate is 4.9% is some confidence interval around that number. Here's what the Employment Situation report Technical Note has to say about their sampling error:

When a sample rather than the entire population is surveyed, there is a chance that the sample estimates may differ from the “true” population values they represent. The exact difference, or sampling error, varies depending on the particular sample selected, and this variability is measured by the standard error of the estimate. There is about a 90-percent chance, or level of confidence, that an estimate based on a sample will differ by no more than 1.6 standard errors from the “true” population value because of sampling error.The 90% confidence interval for the total employment numbers from the household data is +/- 430,000 and for the establishment data it's +/- 104,000. Here are the numbers from the establishment data for total (non-farm) employment in the latest report which includes the data from Nov and Dec 07:

Nov 07 138,037,000

Dec 07 138,119,000

Jan 07 138,102,000

As you can see, all three numbers are within the confidence interval of the statistic, so we can't really say that total employment went up or down in these three months.

You can view the latest report here: The Employment Situation

I find it hilarious that they use a dinosaur icon for the links to historical data!

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