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Don’t be surprised: Employment data get revised

BLS revisions to metro area employment data can be substantial but predictable

The Bureau of Labor Statistics (BLS) released the latest state and local employment data on March 13, 2017. The BLS initially estimated that St. Louis added 38,300 jobs in 2016, but the revised data show that St. Louis actually added 17,100 jobs. This isn’t the first time large revisions have occurred in St. Louis: Last year, BLS revisions to St. Louis employment added 6,800 jobs. Each March, these revisions account for data through the third quarter of the previous year. They can have a significant impact on the story of job growth in the region, so it’s important to be cautious about these preliminary estimates.

The top graph shows year-over-year growth in total nonfarm employment in the St. Louis MSA before and after the revision. Before the revision, St. Louis was estimated to have added 38,300 jobs and grown at 2.8% in 2016. St. Louis has not seen growth that strong since the 1990s. However, the BLS revised those numbers down to around 17,100 jobs added and growth of only 1.3%. While these revised numbers still show moderate growth, it is below the national rate of 1.6% and represents a significant decline from 2015’s 27,800 jobs added and 2.1% growth. Overall, the MSA has 16,600 fewer jobs than previously thought.

Data revisions occur because counting new jobs is a difficult process that relies on samples and advanced statistical techniques. As more information becomes available, data are revised. The BLS uses the monthly Current Employment Statistics (CES) survey to estimate local employment for nonagricultural industries, but the best source of local employment statistics comes from their Quarterly Census of Employment and Wages (QCEW). The QCEW includes data derived from establishments’ reports to the various unemployment insurance programs that are released with about a 6-month lag. Every March, the BLS reconciles the CES estimates with the data from the QCEW, which can result in significant revisions, as we’ve seen repeatedly here in St. Louis.

This year’s revisions underscore the importance of a cautious approach, despite the temptation to take unrevised data at face value: The BLS often revises employment data significantly, and the average absolute revision to 2016 metro area employment growth this year was 1.1 percentage points. The good news is that the revisions are generally predictable. The QCEW data had been growing at a much slower pace than the CES for much of the year for both nonfarm and leisure and hospitality employment. In addition, employment in St. Louis tends to follow the national cycle, so any large deviations in growth from the national rate should be corroborated with other sources of information. It can also be worthwhile to look at other sources such as the Fed’s Beige Book, to gain an understanding of the labor market beyond the latest BLS estimates. While the unrevised estimates were reporting strong growth in St. Louis, the Beige Book reported only modest or moderate growth for the region.

The BLS revised employment numbers in many of the MSAs in the Eighth District. In Memphis, the unrevised data reported employment gains of 2,700 and growth of 0.4% in 2016, but the revision brought those numbers up to 7,900 and 1.2%. In Louisville, jobs for 2016 increased from 4,400 to 5,400 and growth increased from 1.7% to 2.7%. In Little Rock, numbers were revised down only slightly, beginning in July 2015, with minimal effects on jobs added and growth in 2016.

How these graphs were created: The St. Louis Fed maintains records of all data revisions in its ALFRED® database, which allows you to retrieve vintage versions of data that were available on specific dates in history. On the “All Employees: Total Nonfarm in St. Louis, MO-IL (MSA)” page on FRED, click on “ALFRED Vintage Series” in the “Related Content” section underneath the chart to retrieve the two most recent releases, which currently include the revision. Under the “Edit Graph” button, click on “Format” and change the graph type from bar to line. Click on “Edit Lines” and select “Percent Change from Year Ago” for the units and copy to all. The three other graphs are built in a similar fashion.

Suggested by Charles Gascon and Paul Morris.

View on FRED, series used in this post: LOINA, LRSNA, MPHNA, STLNA

St Louis adds 15,600…no, wait…22,400 jobs in 2015: Be aware of data revisions

When the Bureau of Labor Statistics (BLS) released the latest state and local employment data on March 14, 2016, the story of recent job growth changed for many parts of the country. Here in St. Louis, the local economy has about 20,000 more jobs than previously estimated.

Data revisions occur because counting new jobs is a difficult process that relies on samples and advanced statistical techniques. As more information becomes available, data are revised. Estimating smaller geographies is especially difficult: Revisions are less frequent, but their magnitude can be more substantial than for larger areas.

The BLS uses the monthly Current Employment Statistics (CES) survey to estimate local employment for nonagricultural industries, but the best source of local employment statistics comes from their Quarterly Census of Employment and Wages (QCEW). The QCEW includes data derived from establishments’ reports to the various unemployment insurance programs that are released with about a 6-month lag. Every March, the BLS reconciles the CES estimates with the data from the QCEW, which can result in significant revisions, as we’ve seen here in St. Louis.

The top graph shows the St. Louis MSA’s total nonfarm employment before and after the BLS completed its revision. Job growth had been underestimated by close to 20,000 jobs over the two-year period. Perhaps surprisingly, this upward revision was predictable: The QCEW had been growing at a much faster pace than the CES for much of the period, and stronger growth was reported across many industries as the BLS revised employment upward for the majority of industries in the MSA.

Not every industry’s revision was positive. Employment in transportation and utilities (shown in the bottom graph) seemed to be growing at a rapid pace from late 2014 through the end of 2015. But the revision reduced reported employment in the industry by close to 10%: from 53,300 down to 49,600. It’s common for revisions to have a significant effect on industries in a region, as the initial data simply don’t allow sound employment estimates. Knowing whether or not the data have been revised is important when deciding if you should take the number at face value or with a grain of salt.

How these graphs were created: The St. Louis Fed maintains records of all data revisions in its ALFRED® database, which allows you to retrieve vintage versions of data that were available on specific dates in history. On the “All Employees: Total Nonfarm in St. Louis, MO-IL (MSA)” page on FRED, click on “Vintage Series in ALFRED” on the left sidebar to retrieve the two most recent releases, which currently include the revision. Under the Graph / Graph Settings tab, change the graph from bar to line and select other release dates. This will create the top graph. Follow the same general process to create the bottom graph.

Suggested by Charles Gascon and Paul Morris.

View on FRED, series used in this post: SMU29411804300000001SA, STLNA


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