Texas Border Business
A large revision in estimated US employment made headlines recently. The US Bureau of Labor Statistics (BLS) releases jobs numbers every month, and these Current Employment Statistics (CES) estimates are carefully watched, influencing decisions by individuals, firms, investors, and especially the Federal Reserve.
It appears as if there will be a major revision—downward by 818,000 jobs for the March 2023 to March 2024 period. Add to that more recent patterns in various statistics and it becomes obvious that the job market has not been doing quite as well as originally thought. There have been other indications that these numbers had been a bit too robust, and hopefully this revision and related tweaks to the methodology provide a more accurate perspective.
Though imperfect, statistical methods and surveys are well established ways to draw meaningful inferences from limited data, and the CES provides valuable insights. The BLS uses samples of households and firms in deriving the monthly estimates, and translating survey responses to national (and even state and local) estimates involves a complex process and numerous assumptions. As a result, benchmarking efforts are implemented annually as additional data (such as payroll tax returns) becomes available.
About this time of year, it becomes possible to compare the CES to comprehensive counts of employment from state unemployment insurance (UI) tax records. Nearly all employers have to submit this information; thus, the data is much more comprehensive and allows for more accurate estimates. Because it is also significantly slower to come out, however, the interim snapshots from surveys are necessary.
The annual benchmark revisions over the last 10 years have averaged plus or minus one-tenth of one percent of total nonfarm employment, although some years were much larger. The change of -818,000 is significantly above the usual at -0.5 percent. It clearly indicates that job gains over the year were weaker than reported but doesn’t alter the overall pattern of modest growth despite other headwinds.
As to details, the private sector estimates were off by -819,000, with government actually 1,000 higher. The biggest variations were in professional and business services (-358,000), leisure and hospitality (-150,000), retail trade (-129,000), and manufacturing (-115,000). Some industries were underestimated, including private education and health services (+87,000) and transportation and warehousing (+56,400).
The revision won’t be officially implemented until March 2025, but the announcement still provides useful context. While the US economy has been adding jobs, the pace has been weaker than indicated. Although revisions are simply part of a process that has persisted for decades, the timing both reinforces recent Federal Reserve indications of lower interest rates ahead and provides insights into challenges in the efforts to simultaneously achieve price stability and full employment. Knowledge is power! Stay safe!
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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.
