OLMIS

by David Cooke
Published Mar-26-2012

Civilian Labor Force Data Payroll Employment Benchmarking Process Revisions to Prior Years' Data Conclusion

Each year, Employment Department staff, working with Bureau of Labor Statistics economists, revise more than a year's worth of labor force data. Some years the revisions are fairly large and change our perception of the economic health of the state. This year the revisions were modest and our perception of the economic situation in 2011 remains relatively unchanged.

Revisions to civilian labor force numbers were generally small and statistically insignificant. The seasonally adjusted unemployment rate for December 2011 was revised from the originally reported figure of 8.9 percent to the revised figure of 9.0 percent, meaning that Oregon's unemployment rate never dipped below 9.0 percent in 2011.

The biggest revision was to the payroll employment data, where the 2011 annual average nonfarm employment was revised downward by 5,500 or 0.3 percent. Drilling down to the major industry categories, revisions to the 2011 averages were largest in retail trade, which was revised down by 3,000 jobs; leisure and hospitality, revised down by 3,100; and wholesale trade, revised upward by 2,200.

Looking at the monthly data shows that for most of 2011 nonfarm payroll employment was revised downward by about 0.4 percent each month. There was little revision for the first nine months of 2010, but upward revisions of about 0.4 percent per month for the last three months of 2010. These revisions indicate that the Oregon economy was a little stronger than originally reported at the end of 2010, but then throughout 2011 the payroll employment data now look somewhat weaker than originally reported.

Unadjusted and seasonally adjusted Oregon labor force data from 2007 to 2011 were revised as part of usual LAUS (Local Area Unemployment Statistics) annual processing. This annual revision process consists of updating state model inputs, including total nonfarm payroll employment and unemployment insurance claims data. It also incorporates new population controls, re-estimation of model estimates, and re-controlling the state model estimates to revised census division totals.

Revisions to Oregon labor force, employment, unemployment and the unemployment rate for 2007 through 2011 were generally small and statistically insignificant.

The preliminary annual average unemployment rate for 2011 was 9.5 percent, which was the same as the revised figure.

Oregon's latest cyclical peak in the seasonally adjusted unemployment rate remained at 11.6 percent in May and June 2009, unchanged from initial reports.

The seasonally adjusted unemployment rates near the end of 2010 and for early 2011 were revised downward by between 0.2 to 0.5 percentage point; however, the general downward trend in the unemployment rate reported in the 2011 production estimates remained after the revisions (Graph 1).

Throughout much of 2010 and into early 2011, payroll employment recovered slowly following the steep plunge of the Great Recession of 2008 and 2009.

Overall, the revised numbers indicate a somewhat slower rate of economic expansion throughout 2011 than originally estimated. This rather small revision to the numbers isn't always the case with these annual revisions. Often, the new numbers give us either a more rosy picture of the recent past, or an even more glum outlook than we had just weeks earlier.

However, drilling down into the details shows large revisions to many of the major industries.

Construction was revised downward for the first half of 2011. The new numbers indicate an even slower rebound in construction employment levels. Construction of buildings did pick up during 2011. By June 2011, this component industry added 700 jobs compared with June 2010. Nearly all of these job gains came in nonresidential building construction, with the residential side essentially unchanged from the prior year. Single-family home construction and permit activity both in Oregon and nationally has stayed at very low levels for more than three years, and has been a primary contributor to relatively low construction employment in 2010 and 2011.

Heavy and civil engineering construction grew modestly in 2011, with a 500-job increase between June 2010 and June 2011.

Manufacturing experienced little revision overall. Its 2011 annual average was revised down by 100. Manufacturing added jobs throughout most of 2010 and early 2011, but then fell back later in the year.

Revisions to durable goods manufacturing for the 2011 annual average data were to the up side, to the tune of 1,000 jobs or 0.9 percent. Meanwhile, nondurable goods was revised downward by 1,000 jobs or 2.0 percent.

The rapid fall in wood product manufacturing wasn't as severe as originally reported, yet the industry still fell below 19,000 jobs by the end of 2011, from 20,100 in December 2009.

Fabricated metal product manufacturing was revised upward substantially in 2011. It now shows a trend of rapid job gains throughout 2010 and into mid-2011.

Similarly, transportation equipment manufacturing is now pegged to have grown smartly in 2011, when the original numbers showed a sideways trend throughout the past two years. Employment was 11,000 in December 2011, which was up from below 9,800 in November 2009.

For food manufacturing, the revisions were substantial. The new numbers show over-the-year job gains of about 600 in the first four months of 2011 compared with the same period in 2010; whereas, the originally reported figures vastly overstated the employment readings in all of 2011.

The analysts who estimated monthly employment levels in health care and social assistance might as well have taken out a ruler and drawn a straight line rising at 2.5 percent per year because that is essentially what occurred in the revised employment figures for this major industry. For the past two decades, these private-sector health care and social assistance employers have added jobs at a rapid and consistent pace in Oregon. Three of the four component industries were revised downward for the bulk of 2011. Nonetheless, the latest readings show that nursing and residential care facilities still added 1,100 jobs for the year ending in December 2011, while ambulatory health care services added 1,300 during that time.

A major disappointment within the revisions was a ratcheting down of employment in financial activities. The new numbers indicate that this industry continued to drop jobs throughout the past two years, whereas the old numbers gave a false positive reading of some net job gains late in 2011. The bulk of the downward revisions were in the industry titled "real estate and rental and leasing." The new numbers show the industry down 1,400 for the 2011 annual average compared with the year prior. It should be noted that payroll employment numbers in this industry are more difficult to compile since most real estate sales agents are not covered by state unemployment insurance in Oregon and are therefore not tallied in companies' quarterly tax reports like most payroll employment workers.

Retail trade faced one of the largest revisions of all the major industries. Its previously reported 2011 annual average was lopped off by 3,000 jobs, equaling a 1.6 percent downward revision. As Graph 3 shows, retail still grew throughout most of 2010 and 2011, but just didn't experience the huge holiday bounce that the originally reported figures implied.

June 2011 was that last month where census tallies were used for generating the revised payroll numbers. For that month, retail was up 2,400 jobs compared with June 2010. So, retail definitely expanded its workforce by mid-2011. The component industries with the healthiest job gains for that period were food and beverage stores (+900 jobs), general merchandise stores (+500), and clothing stores (+400).

Unlike the large downward revisions in retail trade, wholesale trade performed much better than originally estimated. Graph 4 clearly shows an upturn in the revised data for most of 2010 and 2011. The original numbers showed the opposite: a disheartening languor.

Original estimates for leisure and hospitality employment appear to have been over exuberant. Benchmark revisions were to the downside by 3,100 jobs, or 1.8 percent, for the 2011 annual average. Graph 5 reflects the revision and shows the industry was expanding during 2010 and 2011, albeit at a slower pace than was originally believed. It is quite possible that, a year from now, the numbers in the latter half of 2011 will be revised substantially.

Solid numbers for June 2011 show that the industry has been rebounding, with accommodation adding 900 jobs over the year; food services and drinking places adding 1,700; and arts, entertainment, and recreation up by 600.

This article has primarily focused on the industries showing the largest percent revisions. Most of the remaining major industries - including professional and business services; other services; and government - were revised little, with 2011 annual averages staying within 0.3 percent of their originally reported figures.

The newly revised payroll employment numbers are the result of the annual benchmarking process conducted by the U.S. Department of Labor, Bureau of Labor Statistics, in cooperation with the Oregon Employment Department. For the monthly data through June 2011, original survey-based estimates were replaced with universe employment counts from the Unemployment Insurance tax system. Numbers from July through December 2011 were then re-estimated using sample employment data from a survey of businesses.

The magnitude of the revision to total nonfarm payroll employment for this benchmark was modest by historical standards. The revision to the 2011 annual average for total payroll employment was -5,500 or -0.3 percent. During the prior 19 years, comparable revisions ranged from -1.3 percent in the 2009 revision to +1.2 percent in the 1993 revision, with nearly half of the last 19 years coming in within plus or minus 0.2 percent.

For this year's revision process, BLS revised the not-seasonally adjusted payroll employment data going back to April 2010. However, as is the usual practice, BLS revised the seasonally adjusted employment for the major industry sectors and for total nonfarm payroll employment going back at least five years. Many of the industries were revised back to 1990 due to a refined procedure that incorporates adjustments to each month based on whether it contains four or five weeks. Most of the changes to the seasonally adjusted data series were minor for 1990 through 2009 data.

Although there were substantial revisions to employment in several of the major industries, the total nonfarm payroll employment was only revised downward by 5,500 jobs for 2011. Meanwhile, Oregon's unemployment rates for 2011 were revised little.

Newly revised numbers reflect the Oregon economy's gradual recovery from the recession that ended in mid-2009. Although the state's unemployment rate ended 2011 at 9.0 percent, and is down substantially from 11.6 percent in mid-2009, the rate is still high by the historic standards of the past several decades. Throughout much of 2011, job growth was quite slow overall, especially considering the national and state economies were in an expansionary phase of the economic cycle.