Overstated Job Growth & the Annual Establishment Survey Benchmarking

by: Barry Ritholtz

Friday, we find out just how much the B/D adjustment overstated true job creation in 2007. Every year, the Annual CES benchmark revisions are published in the February NFP. It has all the makings of a potential disaster.

To quote the BLS:

Benchmark revisions reflect a re-anchoring of CES sample-based estimates to incorporate near universe counts of employment. These comprehensive counts of employment, or benchmarks, are derived primarily from employment counts reported on unemployment insurance [UI] tax reports that nearly all employers are required to file with State Workforce Agencies.

In other words, the hypothetical Birth Death adjustments should have no impact.

Here's Floyd Norris' take on other, recent, BLS adjustments:

"The American economy appears to have created far fewer jobs this spring than has been reported so far, a new government report indicated yesterday. That could provide further impetus for the Federal Reserve to lower interest rates when it meets Dec. 11.

The report included a sharp downward revision of the government’s estimate of personal income growth for the second quarter. Because the changes were made as soon as better employment figures were available, the revisions made it seem likely that figures on job creation are also likely to be revised downward in coming months.

The new report concluded that personal income from wages and salaries grew at an annual rate of 1.6 percent in the second quarter, far below the 4.5 percent that had previously been estimated."

Note that the personal income data are based in part on BLS Establishment Survey. This income statistics revision implies that Friday's benchmark revision of NFP may be quite substantial.


Friday, we'll look into January's shocker of a B/D adjustment -- invariably negative due to holidays . . .

Estimates May Have Overstated Job Growth
NYT, December 1, 2007

Technical information: Revisions to CES data for late sample reports, annual benchmarking, and other factors