February 3, 2007

Comprehensive ‘Annual Revision’ to the Employment Numbers Goes Largely Underreported

Filed under: Economy,Taxes & Government — Tom @ 9:35 am

Yesterday’s Employment Situation Summary from the Bureaus of Labor Statistics told us that reports 111,000 net new jobs were added in January. Additionally, significant upward revisions were made to the previously reported job-increase figures from November (up 42,000 to 196,000 from last month’s revised 154,000) and December (up 39,000 to 206,000 from last month’s originally reported 167,000). So with revisions, there were 192,000 more people working (111+42+39) at the end of January than were thought to be working as of the end of December, and 513,000 more (111+196+206) than three months ago.

It gets better.

In that same Employment Situation Summary released yesterday, the BLS reported on its “Annual Revisions to Establishment Survey Data.” Doesn’t sound like much, but read the fine print:

In accordance with annual practice, the establishment survey data have been revised to reflect comprehensive universe counts of payroll jobs, or benchmarks. These counts are derived principally from unemployment insurance tax records for March 2006. As a result of the benchmark process, all not seasonally adjusted data series were subject to revision from April 2005 forward, the time period since the last benchmark was established.

The total nonfarm employment level for March 2006 was revised upward by 752,000 (754,000 on a seasonally adjusted basis). The previously published level for December 2006 was revised upward by 981,000 (933,000 on a seasonally adjusted basis).

In other words, BLS “found” well over 900,000 more jobs, most of which (averaging about 63,000 per month) were added between April 2005 and March 2006. This was a time during which the “weak job growth” meme still had life in it. BLS’s Annual Revision shows that the meme had no validity during that time.

So how does job growth during the Bush years look after incorporating the Annual Revision? Well, even more “Clintonian” than when I last looked at it a month ago:

Emplymt1996to2006rev0107

As you might expect, the coverage of BLS’s retroactively added 900,000-plus jobs has been relatively muted. Finding it requires knowing what you’re looking for and getting past misleading headlines.

The LA Times (may require free registration) didn’t not have the employment news in its home-page business headlines. Times reporter Molly Hennessy-Fiske got the Annual Revision news into her second paragraph but only after this off-putting headline and sub-headline — “Employment still strong despite disappointing month; Unemployment rises slightly to 4.6% from 4.5%. Sluggishness in the housing market could keep a lid on economic growth.” If I didn’t know better, I wouldn’t want to read any further.

The New York Times also gave the employment news no home-page visibility. Jeremy Peters’ and Eduardo Porter’s headline (may require free registration) — “Slower Job Growth, At Least for Now.” The Times did cover the the Annual Revision and asked a question on a lot of minds, including yours truly’s, beginning in the article’s fifth paragraph (bold is mine):

But employers may be hiring at a faster clip than is immediately apparent. The Labor Department also acknowledged that employers added nearly one million more jobs from March 2005 through last December than it had previously estimated.

Last year, employment growth exceeded earlier estimates by more than 400,000 jobs. The magnitude of the change suggested that the Labor Department might be seriously underestimating the growth in employment.

“The size of the upward revisions was enormous,” said Joshua Shapiro, chief United States economist with MFR. “You put the pieces of the puzzle together, and it sort of tells you that the 111,000 number is not something to focus on.” January’s number will be revised in February and March, and will be subject to an annual adjustment next year.

But if the Times’ “expert” said that the January number wasn’t something to focus on, why did the article’s headline do just that?

Also — The reporters’ stat that 400,000 jobs were retroactively added to 2006 (“last year”) is probably technically correct, but I see it as a “clever” way to avoid mentioning the hundreds of thousands of additional jobs retroactively added to 2005, AND to avoid mentioning the 900,000-plus grand total of jobs retroactively added.

The Washington Post’s Neil Henderson (may require registration) did not mention the Annual Revision or the 900,000-plus jobs retroactively added at all.

Once again, the Bush jobs machine isn’t getting the credit it is due. The BLS needs to take a serious look at why it is taking so long to discover hundreds of thousands of workers.

Cross-posted at NewsBusters.org.

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UPDATE: AP got to the news — at the 18th paragraph. And it mentioned the 750,000-plus adjustment to March 2006, not the rest of the 900,000-plus that was added to December 2006.

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7 Comments

  1. Between the employment data put out by the BLS that failed to count the equivalent of the entire working population of Nebraska, and the so-called personal savings data that doesn’t include people’s 401(k) accounts, there’s a pretty good case to be made that the government’s numbers are badly broken.

    What’s particularly disturbing is that the bureaucrats do not seem to being held to account for such gross errors, nor do the politicians that have oversight authority for the agencies involved seem to be doing much about it.

    Comment by Ironman — February 3, 2007 @ 10:55 am

  2. #1, See comments 1-4 here.

    http://www.bizzyblog.com/?p=1361

    401k IS considered, and if 401(k) savings is, say, 4% of all income, then people are borrowing more than they are taking in to the tune of -5% to get to the -1% reported.

    Comment by TBlumer — February 3, 2007 @ 1:15 pm

  3. I checked the BEA site, and found the following from their FAQ for personal savings data:

    Personal saving is the amount left over from disposable personal income after expenditures on personal consumption, interest, and net current transfer payments. This amount is available to acquire financial assets such as bank deposits and mutual funds, to use towards acquiring a home, or to reduce liabilities by repaying principle on mortgages or consumer debt.

    Which to me reads as though the data only considers income after-taxes, meaning that pre-tax contributions to 401(k) type plans, traditional IRAs, etc. are not accounted for in the calculations for personal savings.

    I haven’t found any solid numbers for total pre-tax savings contributions made in any given year as yet, but when you consider that “77.3% of eligible employees held balances in their 401(k) plans. Pre-tax deferrals averaged 5.4% of pay for lower-paid and 6.7% of pay for higher-paid employees” [1] and that “As of year-end 2003, estimated number of plans with a 401(k) feature: 438,000, with total assets estimated
    to be $1.9 trillion and 42.4 million active participants.” [2], just in 401(k) plans, it would seem that the personal savings data is missing a serious chunk of change.

    I’m willing to be wrong, but I’d like to have the data to confirm that I am!

    Comment by Ironman — February 5, 2007 @ 12:12 am

  4. #3, I’m going to have to do an example here at some point, but I’m just too swamped. I hope you tried to follow my comment 4 at last year’s post referred to in above comment 2.

    Comment by TBlumer — February 5, 2007 @ 2:37 am

  5. #4: I think I have to agree with Bill’s #5 comment from your link!

    Comment by Ironman — February 6, 2007 @ 12:10 am

  6. #5, yup.

    Comment by TBlumer — February 6, 2007 @ 12:15 am

  7. Economics and Social Policy XXXIII…

    Special “Pros v. Joes” edition….

    Trackback by The Boring Made Dull — February 12, 2007 @ 6:36 pm

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