Economists and statisticians make a living measuring and analyzing things that aren’t always easy to explain.  And even if we do succeed in communicating what concepts like productivity, output, and inflation are trying to capture, that falls considerably short of what is needed to fully digest the regular reports on our economic progress.  If you’re a cynic, you could call this job security for economists – since we invented the concepts, you need to hire us to explain them.

But there is one, crucial economic indicator that connects directly with the public at large, namely, job growth.  No one needs to listen to a university professor explain what a job is.  And, at least it would seem, the process of adding them up for the entire economy doesn’t require a Ph.D. to understand, either. 

The conceptual simplicity of counting jobs is one reason why most of us are aware that employment growth in the U.S. economy has been disappointing in recent months.  We understand it, and with news of closing factories appearing in headlines more often than we’d like, many of us can relate to it personally.  And in the midst of a political season, there’s no shortage of people to bring it to our attention.

But while political candidates, labor leaders, and most of the business media have focused on one particular measure of job growth – growth in jobs on business payrolls – a second measure of employment, based on a survey of households, has quietly moved in the opposite direction. 

The gap between the two measures of employment – yes, there are two – is not a matter of decimal points.  It amounts to millions of jobs, and tells a story about the economy that we need to know.

The news that payroll employment finally broke out of its funk and grew by 308,000 jobs in March is great news, to be sure.  Now that the national economy has added almost 750,000 net new jobs since last August, there is a basis for the hope that the lethargy in hiring by businesses has ended.  Even after March, however, we remain more than 2 million jobs short of where payrolls were before the recession began. 

On the other side of the Bureau of Labor Statistics, where the employment counts based on household surveys are tallied, it’s another story completely.  In the last two calendar years, when payroll employment data showed a slow decline before the August 2003 turning point, household employment registered solid gains.  When households were asked at the end of last year about their job status, two million more of them said they had jobs than said so at the close of 2001.

In fact, by the reckoning of the household-based employment data, the economy has completely bounced back from the recession of 2001, with more people working today than before the recession began.  Since the household employment data are used to derive unemployment rates, this fact also explains why jobless rates have fallen slightly even as payroll employment, until recently, remained stagnant.

There are several reasons for this apparent contradiction, but the most important one is that payroll employment, by its very definition, fails to count the self-employed. The evidence suggests that, out of necessity of out of choice, workers have increasingly taken their livelihoods into their own hands in recent years.  Rising self-employment, plus gains in new business startups that can elude and survey of existing businesses, have thrown a monkey wrench into the simple idea of using payrolls to count jobs.

So maybe we need an economist to explain jobs to us after all.  At the very least, we need to understand that not everyone who gets paid to work show up on a payroll.