The Breakdown | Explaining Southern California's economy
Business & Economy

Is the Labor Department missing small business jobs?


So by now everybody knows about the disappointing March jobs report from the BLS. Marketplace's Heidi Moore commented on "The Madeleine Brand Show" this morning that the glass is still half full. She stressed that we were promised a slow recovery, and we're getting a a slow recovery.

But she also raised the scary prospect of structural unemployment, which essentially means that we have workers who can't get a job because the skills they have are either no longer needed in the volumes they were before the financial crisis; or because they aren't living in a place where their skills can be put to use. You could add to that the disappearance of whole career options — not much demand for typesetters these days — and you get a new definition of "full" employment, maybe something more like 6 percent than 4-5 percent.

However, we are dealing with data here, and that data doesn't always capture what's happening in the economy. Economist Mark Zandi of Moody's went on MSNBC to talk with Chuck Todd about the bad report (see above for the video) and noted that we may not be fully counting the creation of jobs by small business. At any rate, the BLS may not be capturing this data as rapidly as some other sources.

For example, the ADP report — which comes out right before the BLS report each month — said March saw 209,000 jobs added, more than 100,000 of which were created by small businesses. Now, the ADP report has been plenty wrong in the past. But it does have one big advantage, which is that the nature of ADP human-resourced-oriented business means that ADP can capture small business hiring more immediately than the lumbering Labor Department.

So let's say ADP is only 75 percent right about small business hiring. That's still 75,000 jobs, a big chunk of the BLS's March total of 120,000. 

Maybe we'll see this reflected in the April data, when the BLS revises its March figures. That said, an upward revision of 75-100,000 would be unlikely. Nevertheless, given that small businesses create a lot of jobs, this is a datapoint that worth a closer look in the months ahead. And for Los Angeles, it's particularly important, as our region is a hotbed of small businesses.

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