Saturday, September 7, 2013

US August Numbers Should Not Have Surprised Anyone

Anyone looking at the Georgia employment report in July could guess that the employment number for both the state and the US was due for a downward revision.

The numbers for August bear out this statement. The US reported a nonfarm employment increase of 169,000 in August. The initial report for July showed an increase of 162,000 jobs that was revised in the latest release down to 104,000.

For Georgia, the state showed a sudden leap of 30,900 jobs in preliminary numbers for July. Not only was this quick rise unexpected; if true, it meant that Georgia created 1 out of every 5 jobs in the country in July, an unusual event for a state that has been keeping just above national job growth numbers.

It appears that the adjustments were not due to true “errors” but to the vagaries of seasonal adjustment. August is a difficult month to seasonally adjust as school systems continually change their opening dates, thus affecting employment levels in their systems.

The revision just shows that seasonal adjustment is not a precise science, but an art.

In past years, it might have been possible for someone at the Georgia Department of Labor to adjust the adjusted numbers before they were reported, so as to prevent these sorts of jumps and retreats. But the Bureau of Labor Statistics has had a policy of taking people out of the adjustment process and depending instead on computer programs.

This policy change was out of a concern that individuals biases might affect the numbers. It is also true that adjusting the numbers is a delicate maneuver and required great experience with the underlying databases to get the adjustment correct. 

With retirements of experienced people both at the BLS and at the Georgia Department of Labor along with personnel policies that may be discouraging some of the brighter minds from going into public agencies, there are fewer folks that have this level of expertise and have spent the years with the data to make these delicate adjustments correctly.

Instead, we put our faith in unflinching computer programs that work without bias, but also without an instinct for the data. Unfortunately, for the reasons given above, there is no going back to the older ways.

As for the news reports, in all, the 169,000 job increase, termed “disappointing” in some news reports is an unfair characterization of the data. The numbers show an economy recovering, although at a slow pace. The US economy is recovering, even if at a slower pace than many would wish. This slower than expected recovery may be with us through most of 2014.

With the release of the August national data, we can now expect downward adjustments in Georgia’s July numbers also. The July revised numbers plus the August preliminary data, when it is released, should show the state on its steady upward trajectory slightly faster than the US but by no means a standout among states.

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