Unemployment data released on June 1 sent pundits into a panic: the economy is slowing, and they were shocked. Looked at through a political prism, the rose-colored glasses economists and analysts wondered what happened to the recovery that was underway. Yet in that very report where the unemployment rate went from 8.1% to 8.2% were positive changes.

I have long written about the bias against small business in economic reporting. The emphasis on payroll jobs in the business press, rather than the small business economy of freelancers, proprietors, partnerships, and other forms of small business, has been unfortunate. Little is written about various laws and regulations and their effects on depressing payroll employment while at the same time increasing in the incentive for non-payroll employment. It's like they're saying that only work in big companies matters, and small businesses don't matter. While it's said that “small businesses are the backbone of our economy,” it's better said that the reliance on and frequency of transactions between businesses of all sizes is the economy's backbone. Big business relies on small business just as much as the opposite. Small business is flexible, provides access to specialized knowledge and skills, and provides economic buffers to the risks and changes that larger businesses seek to manage or avoid. Small business provides the largest percentage of employment, but it also is the biggest variant in the economy's increases and decreases in employment as the economy ebbs and flows. Changes in employment in large companies are nothing compared to the radical swings that small business employment displays. It may not be the backbone of the economy as is often said, but it is an essential barometer of economic well-being and direction. Yet it's ignored by even the business press.

The calculation of the unemployment rate comes from a different series of data than the payroll jobs report; it comes from the household survey and includes non-payroll employment. So it’s kind of an apples to oranges comparison. While the press was focusing on the small rise in payroll employment of +69,000, the increase in the household survey was a whopping +442,000. The unemployment rate went up because the labor force increased by +642,000. Increases in the labor force are often signs that the economy might be improving. Sure, this increase could be temporary, but the unemployment rate did not go up because more people lost their jobs; it went up because more people believed that work was worthwhile seeking.