Revised look at jobs report: By paying more, Census added workers who could have gone to private firms for lower pay

Last week's disappointing report on the job market may not be as dreary as it appears.

Some economists say the addition of 411,000 temporary Census workers in May didn't just mask a poor showing by the more critical private sector — it could have been a big reason for the bleak numbers.

Many unemployed workers who otherwise would have taken permanent jobs at private firms instead likely opted for higher-paying temporary Census jobs, economists say. That could have left fewer good candidates for private-sector jobs and prompted employers to put off hiring, says Phil Orlando, chief equity market strategist for Federated Investors, an investment firm.

In fact, a similar dynamic was at work in each of the previous four censuses, Deutsche Bank said in a report.

"Faced with the opportunity of making an outsize amount of money and not working terribly hard as opposed to taking a more challenging position for half the money, people said, 'Let's make some additional money now,' " Orlando says.

The private sector added 41,000 jobs in May, vs. 158,000 in March and 218,000 in April. May's dismal report helped drive down the Dow Jones industrial average by 323 points Friday.

Census takers, who visit households that haven't completed their surveys, can earn about $18 an hour — vs. the $12 to $15 pay of many retail and hotel-service workers, according to figures from the Census Bureau and Labor Department.

Many Census workers normally would work in fields such as retailing and hospitality, says economist Peter Newland of Barclays Capital. A drop in employment by those industries is another sign Census hiring could have siphoned off private-sector additions, Newland says. Retailers trimmed a net 6,600 jobs in May after adding 18,500 in April. Similarly, the leisure and hospitality industry added just 2,000 jobs in May, vs. 35,000 in April.

Newland says the effect of Census hiring was "significant," drawing tens of thousands of potential hires from private firms.