It’s hard enough for the US Federal Open Market Committee to fulfil its task of returning inflation sustainably to its 2% target without any material increase in the unemployment rate, without having to wonder what the employment rate actually is. FOMC members are currently unsure whether employment increased by 272,000 or decreased by 408,000 in May – both are official figures from the Bureau of Labor Statistics. The establishment survey, which asks businesses about jobs, shows a pickup in hiring; while the household survey, which asks people whether they have a job or not, suggests fewer people in work. As they are surveys of different things, the two do not need to match, but the recent discrepancy is unusual, with the household survey pointing to just 0.38 million jobs created over the past year, compared to 2.76 million on the establishment measure. Fathom has previously written about how the discrepancy might be explained by an increase in net inward migration. A broader range of economic data, from initial claims to spending, suggests that the economy continues to add jobs. However, that is often the case until it is not. Job losses mount slowly and then all at once. Without conclusive data, members of the FOMC must therefore hope that not only does employment continue to rise but that this recent discrepancy goes down – as does inflation.
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