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It's the Data, StupidHow Bush explains away America's employment problems.

By Daniel Gross
Posted Wednesday, Jan. 21, 2004, at 2:34 PM ET

Some of the harshest criticism of President Bush's State of the Union address came from unlikely quarters. Andrew Sullivan dubbed it Bush's worst yet, in part because he displayed "complete insouciance toward the deficit and, more importantly, toward those who have not yet benefited from the economic recovery. ... To brag about a growing economy without some kind of passage of empathy for those still struggling reveals major political obtuseness."

The job market is plainly pretty lame. The economy created just 1,000 payroll jobs in December, even though economists had expected it to create at least 150,000. The unemployment rate fell to 5.7 percent, but largely because hundreds of thousands of Americans stopped looking for work.

For Bush to acknowledge this directly in a State of the Union address would only provide an opening to opponents. But it's not just politics—obtuse or astute—that account for the president's skirting of the issue, or so the administration says. According to Bush and his supporters, the problem isn't the weak job market. It's the data that suck.

The Bureau of Labor Statistics measures employment in two ways. In the Establishment Survey, it gathers payroll data from 400,000 companies and then estimates how many Americans have jobs at companies. The payroll figures are derived from these numbers. The Household Survey is based on surveys of individuals in 60,000 households, and it produces the unemployment rate. Occasionally, the two surveys show divergent trends in job growth, and the payroll survey has been known to undercount jobs when an economy is coming out of recession. Last October, I dubbed the debate over the two surveys "antidisestablishmentarianism."

In the past two weeks, antidisestablishmentarianism has become the creed the White House and its sympathizers are busy broadcasting. After the December employment was released on Jan. 9, Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thomson, Inc. and a noted antidisestablishmentarian wrote in this report: "there is something terribly wrong with the non-farm payroll statistics and the Establishment survey that produces them. We find it very hard to believe that the December increase of just 1,000 jobs was anywhere near accurate."

In his brief reaction, Treasury Secretary John Snow engaged in another favorite antidisestablishmentarian tactic. He changed the subject from unfavorable payrolls to the more favorable unemployment rate. "Following five months of job growth, the unemployment rate fell in December to a 14-month low."

Next, N. Gregory Mankiw, the chairman of the Council of Economic Advisers, tried to put an epistemological sheen on the antidisestablishmentarian line in an interview with Louis Uchitelle of the New York Times:

[Mankiw] said in an interview that the official job count showing 1,000 new jobs in December was not accurate by itself. "I view all economic statistics as imperfect," he said. "They have to be taken with a grain of salt." In challenging the reliability of the official count, Mr. Mankiw sought to water down its message, which is that 2.3 million jobs have disappeared since President Bush took office in January 2001. ... The household survey has employment rising by 689,000 jobs in the Bush years. "I am not going to take a stand as to which survey is more meaningful," Mr. Mankiw said—challenging in effect the Bureau of Labor Statistics and the Congressional Budget Office, which have declared the establishment survey the more reliable one.

The comparatively strong Household Survey figures were also one of the reasons cited by Republicans in Congress when they decided not to extend unemployment benefits last month.

Last night, Bush didn't mention many specifics about jobs figures other than to note that "Productivity is high, and jobs are on the rise." (Of course, high productivity is one reason that jobs may not be on the rise.) His grab bag of proposals called "Jobs for the 21st Century"—more emphasis on reading and math in schools, encouraging science professionals to teach in high schools, more Pell Grants, and more cash for community colleges—dodged the question of employment doldrums.

At this late date, changing the subject and casting doubt on the validity of payroll numbers seems like the best strategy for Bush appointees and supporters. It's looking ever more likely that Bush will indeed be the first president since Herbert Hoover to preside over a four-year term in which payroll jobs fell. Does that sound a wee bit demagogic? Absolutely. Under Hoover, the nation lost 24 percent of its payroll jobs. Under Bush, the United States has lost fewer than 2 percent. But it's effective rhetoric.

The divergence between the payroll and household figures does raise some interesting questions over which economists will surely puzzle. Has the slack corporate job market turned millions of Americans into self-employed entrepreneurs who don't get counted in the payroll survey? Have American companies simply become so ingenious at wringing productivity out of existing workers and technology that they don't need to hire? It's a debate that won't be settled for at least a year, when this year's figures get revised. It's possible the antidisestablishmentarians may indeed be right. But at this point, the official disdain for the payroll survey and the embrace of the Household Survey is more about belief than data.

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Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at . He is the author of Pop! Why Bubbles Are Great for the Economy.
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