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InsiderOnline Blog: August 2004

Those Rascally Payrolls

Now that we've all had some time to take a couple deep breaths, and the Fed has assured us that the economy is in good shape, what the heck happened with the jobs numbers last week? Turns out the Bureau of Labor Statistics, the same agency that gave us the 32,000 figure, released a study the same day, which examines inaccuracies in the payroll survey and its sometimes huge divergence from the household survey.

Because CES (payroll survey) is a count of jobs not workers, if workers change jobs within the payroll survey reference period, both jobs are counted. Because CPS (household survey) is a count of persons, this phenomenon does not affect that survey’s estimates... the CES grew faster than the CPS during the rapid expansion period of the mid-to- late 1990s, and the CES has shown slower growth than the CPS since the last official business cycle peak in March 2001. If job changer rates increase during expansionary periods and decline during recessionary and slow growth times, the job changer effect may explain some of the apparently cyclical nature of CES and CPS divergences.

Hmmm, seems like I've heard that somewhere before. In the words of Heritage's own Tim Kane:

  • The payroll survey double-counts many workers who change jobs and is now artificially deflated because job turnover is down. Decelerating turnover in 2002-2003 explains up to 1 million jobs artificially "lost" in the payroll survey since 2001.
  • The BLS household survey indicates record high employment. The disparity of 3 million jobs (in employment growth) between the household and payroll surveys since the recovery began is unprecedented.
  • The disparity between the two BLS surveys of total employment is cyclical. The disparity widens during recessions and narrows during periods of rapid growth in gross domestic product (GDP). Such variation strongly suggests a statistical bias in one of the surveys.
  • Payroll survey data are always preliminary. Past revisions have regularly shown the initial estimates to be off by millions of jobs. For example, initial estimates of job losses in 1992 were revised in 1993, 1994, and 1995 and now show net job creation.
  • The payroll survey does not count the surge in self-employment. The household survey has recorded a surge of 650,000 self-employed workers. This number may be even higher if modern workers in limited liability companies and in consulting positions with traditional firms are not identifying themselves as self-employed.

Both are great studies to be armed with when future employment numbers come out. More from Kane on payrolls, here.

Posted on 08/13/04 10:25 AM by Mary Katherine Ham

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