Friday, September 30, 2022

The government has grossly underestimated job growth this summer

The government has grossly underestimated job growth for much of 2021, including four months this summer when it missed out on more job growth than ever before.

In the last four amended months, from June to September, the Bureau of Labor Statistics (BLS) reported that it underestimated the 626,000 job growth in jobs — the largest underestimation in any comparable period since 1979. themselves would be a job report, they would be an absolute blockbuster.

On average, the month before the pandemic, estimates will be revised for just over 30,000 jobs, or just 0.02% of all jobs in the United States. Recent changes to job reports have been much larger.

Missing jobs came to light as a result of a revision of the widely observed data on the number of non-farm jobs that BLS publishes every month. The data are considered preliminary until they are revised twice. The fixes are usually minor, but the recent fixes were large enough to turn a significant bust into an unexpected spike.

These waves of revisions in the same direction tend to occur at turning points in the labor market. BLS relies on high-tech models to adjust to seasonal changes, plant closures and other factors in order to catch new labor market trends and quickly make adjustments.

This has happened before during this pandemic. Changes made in the already disastrous months of March and April 2020 showed that the economy lost 922,000 more jobs than originally reported. In addition, earlier during the pandemic, the BLS was criticized for misclassification in another study that BLS economists said significantly underestimated the unemployment rate. Due to how some of the survey questions were interpreted, millions of workers who said they had a job but were unable to work due to the coronavirus outage were flagged absent rather than temporarily unemployed.

This time around, the wage data was muddled as businesses were slow to respond to government polls amid the chaos of the pandemic – part of a broader scheme in which a deadly virus has wreaked havoc on federal statistics.

Angie Clinton, head of the BLS division that oversees payroll data processing, said there have been more major changes since the coronavirus pandemic began, but the changes are a sign that the system is working as expected.

“In fact, we’re just improving the estimate using everything we know for the month we’re publishing,” Clinton said. “I mean, it sounds counterintuitive to most people, because the fixes – they think, ‘Oh, they were wrong the first time.” But no, we understood everything based on what the sample told us. But in the future we get more samples, some corrected entries and recalculate seasonal factors, which together may indicate a different story. “

The changes changed the story of the summer recession. In August, when economists expected a significant development of the 943,000 jobs the economy added in July, BLS announced that the US added only 235,000 jobs. The headlines dubbed it a “colossal blunder” as job growth took a “giant step backward.” Two months later, a revision based on additional data showed that the number of jobs in August rose by 483,000, more than double the original anemic figure. This was the largest positive review in nearly four decades.

When it was revealed that the economy had added just 194,000 jobs in September, headlines called it “ugly,” “dark,” and “disappointing.” A month later, a revision showed that the economy actually added 312,000 jobs in September.

After the amendments, disappointing months like August were more like October, the month heralded as a recovery in the labor market. In retrospect, although the June and July blockbusters were even better than they looked, they did not lead to months of stagnation – they diminished somewhat, but still provided a steady, steady growth that continued until October.

President Joe Biden may even have paid the political price for the low number of jobs. From April to June, polls showed a majority of Americans (51%) approve of Biden’s approach to the economy, according to median polls by Fox, NBC, Quinnipiac, and The Post. But as bad economic indicators came out and the political climate in the country deteriorated, those numbers fell steadily – in October, only 39% approved of Biden’s approach to the economy, while 57% disapproved.

“Skeptics and opponents of the Biden program are going to use whatever ‘bad’ economic indicator they can as evidence of why Biden is wrong about economics or why Biden’s Build Back Better proposal is wrongly reflected in the economy, and in this sense underestimates the number of workers places are useless, ”said Lindsay Owens, executive director of the left-wing Groundwork Collaborative.

However, the decline in Biden’s economic endorsements during this period can also be attributed to other concerns, such as rising inflation and the controversial and abrupt withdrawal of troops from Afghanistan, which have affected Biden’s endorsement across the board, Owens said. In such an environment, Owens said, a few reports of slow performance may not be a major factor in public opinion.

The change for each month simply reflects the economists’ new best estimate based on additional data. For example, when companies report a surprisingly good month like October this year, seasonal adjustment algorithms look back to previous months with the benefits of hindsight. A good October probably didn’t come out of nowhere: the estimates for August and September likely missed some gain. Thus, it is assumed that some jump in October occurred earlier, and part of the October gain is redistributed back to previous months.

These likely first estimates are often refined as different responses are received from over 697,000 businesses surveyed each month, including large employers, government agencies and the ever-changing composition of small businesses. Companies ask how many people they hire, how much these people get paid, excluding bonuses, and how many hours they pay.

Typically, over the past month, about a quarter of responses came late. When businesses fail to respond, economists and their models must consider all the reasons a company might not provide a survey, including the possibility that it could suddenly close a store. They should also consider newly formed businesses that are not yet on their survey lists.

Jane Oates, president of the employment nonprofit WorkingNation and an employee of the Department of Labor after the Great Recession, said the coronavirus crisis and the ensuing shortage of workers have put many employers under dire stress. One plausible explanation for the Department of Labor’s chronic underestimation is that the employers who hired the most were too busy to answer the survey, so the initial responses did not include the fastest-hiring firms.

“During the Great Recession, it affected many employers, but now it has affected every employer. Everyone is looking for talent. And I’m sure the percentage of those who don’t meet the deadline is much higher, Oates said.

Before the pandemic, about 60% of businesses you contacted responded to the survey, according to BLS data. By May 2021, the last month for which data are available, the rate had dropped to 49%. These low response rates may have played a role in the unusually high revisions seen over the past two years.

Rather than showing the BLS failed, the change is a tribute to the agency’s commitment to getting the numbers right, according to Cornell University economist Erica Groshen, who served as BLS Commissioner from 2013 to 2017.

“They take their responsibilities very seriously,” Groshen said. “They are very transparent in their methodology and are always trying to improve it.”

BLS is a professional civil service agency. The only political appointee, the Commissioner, has no access to the numbers until they are finalized. Economists and statisticians tasked with counting jobs operate with near-fanatical secrecy, Groschen said.

When employees worked in offices, before the pandemic, security was so tight that if window washers appeared outside their windows, employees would get up and close the blinds. The staff had to take out the trash from their closed offices – outsiders, even the cleaners, were not allowed to enter the inner sanctuary of statistics.

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Scott Clement of the Washington Post contributed to this report.

Nation World News Desk
Nation World News Desk
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