Importance of Employment Statistics and Numbers and How to Interpret Them

The Importance of Employment Statistics

Management students and professionals alike should know the importance of employment statistics and numbers and must also know how to interpret such reports. Indeed, based on employment statistics and numbers, several important business decisions such as when to enter a particular market or how to base such entry strategies need to be made.

Given this aspect, it is also important to note that employment statistics and numbers usually mask deeper trends and hence, one must not only know how to read such reports but also know how to extrapolate such numbers and translate them into actionable information based on which several important business decisions can be made.

It needs to be remembered that the raw data that is presented in the employment statistics and numbers can be transformed and translated into useful information that can then be used to base business decisions.

Different Categories in the Employment Statistics

To start with, it is important to note that employment statistics for the formal and informal sectors are two different aspects. For instance, the formal sector employment figures are relatively straightforward as most of the information and the data pertaining to formal sector employment come from the firms in the sector where anyway employee information is present in official statistics.

In other words, the formal sector maintains accurate and reliable data about the number of employees and other such information. However, this is not the case with informal sector data wherein employee information and data is usually sketchy and not reliable.

After all, one cannot expect a shop or a small scale outfit to have accurate information and data about their employees as most of the employees are usually hired on an ad hoc basis without any social security benefits or even fixed salaries and other perks.

Thus, managers and management professionals and students need to understand that informal sector figures for employment must be interpreted after proper due diligence has been done.

How to Interpret Employment Statistics

This can take the form of reading the seasonal figures as well as the flux and the flow of employment figures for a specific period as well as for rolling averages. In this manner, it would then be easy to interpret such figures and make sense of how much the informal sector is hiring and growing.

After the distinctions between the formal and informal sector, it is also important to note that unlike advanced Western countries, developing countries such as India and China are yet to develop a reliable and accurate method for reporting employment statistics.

Indeed, of these two countries, India is known to have a very basic and rudimentary system for employment data collection and reporting. Though the Indian Government has started to devise a more robust system for such data collection and reporting, it is highly likely that it would take a few years before employment statistics and numbers in India would be anywhere near Western standards.

This is the reason why most businesses in India often go by the private surveys and research institutions reports on employment rather than rely on the official figures. This is also the reason why Indian firms and decision makers in them often look for other measures such as seasonal rise and fall of employment and provident fund records to base their decisions.

Understanding Western Employment Numbers

It is also the case that Western countries and their employment figures are also not as straightforward as they seem. For instance, the United States has several categories for reporting employment data wherein the BLS or the Bureau of Labor Standards which is the Governmental Agency for reporting such data often presents the employment figures under several heads.

To take an example, the unemployment figures are reported based on the number of people filing for unemployment assistance and other aspects such as those who report their status as not being employed in a specific firm.

However, this masks a deeper reality as the number of workers who have stopped looking for work completely is not captured fully since such figures do not come up either in the employed or unemployed categories.

In other words, workers who have stopped looking for work are neither captured as employed or unemployed since they simply drop out of the official statistics.

This is the reason why decision makers in the United States often rely on figures for unemployment assistance as well as average numbers of jobs created as a way of estimating the employment percentages.

The Gig Economy Calls for Newer Methods of Employment Statistics Reporting

With the rise of the Gig Economy or the Freelance Economy, there is a need to capture those freelancers and part timers who do not come up in either the full time employed or unemployed categories.

In other words, freelancers typically do not report themselves as fully employed or unemployed since the nature of their work is such that they do not fall into these categories.

This is the reason why many Economists in the United States are calling for a changed system of employment statistics to be more in tune with the needs of the emerging Gig Economy. Thus, as the discussion so far showed, employment statistics need to be understood and interpreted carefully if one has to make sense of them.

Moreover, with structural changes in the Economy, there is not a straight method by which employment numbers can be collected and reported. To conclude, management students and professionals alike need to understand that interpreting employment statistics needs some effort which is by no means that difficult provided one knows where to look and analyze.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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