An Absurdly Large Outlier in the History of BLS Revisions

OK, let’s have a quick look at Friday’s NFP:

Yes, we know that 51k new jobs stink; No, it was not a "perfect number" (Attention Mark Zandi: please lay off the Psilocybin before airtime).

Notable beneath the awful headline was the even more astounding adjustment:  Payrolls for the
12 months ended in March 2006 will be revised higher by 810,000

Thanks to this adjustment, the BLS now claims that job growth during the 12 months ended in March 2006 was 45 percent higher than previously reported. The revision magically adds payroll employment growth between March 2005 and March 2006 up by a 67,500 per month.

This was the
biggest revision since the Labor Department started benchmarking in 1991.  To make a comparison, "the aggregate benchmark revisions dating back to 1996 added a whopping 1,555K jobs to the economy, 810K of which (52%) were added during April 2005-March 2006!"

Reuters noted that: "The historical average for the benchmark revision over the prior 10 years has been plus or minus two-tenths of one percent…BLS currently is researching possible sources for this larger-than normal expected revision."

This benchmarking is 100% larger than the largest prior numerical revision, and 50% larger than the prior percentage revision:


The ironic thing is that even after this revision, this still remains the worst job creation cycle in the post WWII era . . .


I need to do some more research into how credible (or INcredible) this revision is. But at first blush, it is an absurdly large outlier relative to prior benchmarking in BLS revisions . . .





Jobs Report Shows a Mixed Picture
Growth in Payrolls Slows,But Some Wages Increase;

Rate Shift Appears Unlikely
October 7, 2006; Page A3

U.S. jobs picture stronger with expected revisions
Reuters, Fri Oct 6, 2006 10:16am ET

CES Preliminary Benchmark Announcement
BLS, October 6, 2006

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What's been said:

Discussions found on the web:
  1. The Hube commented on Oct 9

    I believe what the revision allows them to do is to increase their net births/deaths adjustment for the current period.
    I would bet a lot of money that Katrina has something to do with that adjustment.

  2. TC commented on Oct 9

    The cloud around the silver lining however is that, without a commensurate revision to output, productivity has been much lower than reported

  3. wcw commented on Oct 9

    I find the revisions perfectly credible, though curious.

    TC is right about productivity, though how lower productivity growth is a ‘silver lining’ eludes me.

  4. brion commented on Oct 9

    what is wrong comrade Ritholtz?
    Are you skeptical of numbers showing higher, ever glorious higher??

    With patriot’s voting day so close to hand and the BSS leads the way!!!!!

  5. Craig H commented on Oct 9


    That is an excellent observation.

  6. Detroit Dan commented on Oct 9

    What is wrong comrade Ritholtz? Are you skeptical of numbers showing higher, ever glorious higher?? [brion]


  7. grodge commented on Oct 9

    Even if that 810K number is excessive by 20 or 30%, it’s still a big up-revision. Perhaps the market has been telling us this with the (albeit low volume and selected sectors) spurt toward Dow 12K these past few weeks.

    I’m starting to doubt the 25% pull back that has been expected by many of the more bearish prognosticators. 5 or 10%, maybe, but 25%?

  8. bob commented on Oct 9

    If they revise payrolls up, then everything will be revised down – productivity, average income, everything!

    Especially – the downward revision of productivity will hurt a lot.

    Those are BAD news.

  9. Mark commented on Oct 9

    Isn’t this PRELIMINARY? Very good way to get some B.S. good news out there for consumption, later to be withdrawn, probably without the Emily Litella “Oh! (pause) Never mind.”

  10. wilburpup commented on Oct 9

    No way can you call the revision “absurd”. There were two 0.4% revisions (up and down) in the 1990’s; this one is 0.6%. It is an outlyer, yes, but not by much and the sample size is pretty small (15).

    Furthermore, the nature of the job market has changed dramatically, with many more people working at home. It takes time for the statistics to account for this increase because the establishment survey techniques are not designed to pick up enough marginal job creation at such a micro level.

    The household survey has, however, picked up a lot of this growth, so it appears that the establishment survey is simply catching up with it.

  11. BDG123 commented on Oct 9

    I suppose soon we will start seeing revisions in the Iraqi war. I wouldn’t be surprised to see that all of this violence was made up by the press, we found Bin Laden a year ago and Iraq is the new Club Med.

  12. brion commented on Oct 9

    …with many more people working at home…”

    You mean like, “yardwork” wilbur?

  13. atlanta_renter commented on Oct 10

    The revision is probably all the full-time Walmart jobs that are now two part-time jobs.

  14. The Big Picture commented on Nov 3

    NFP: Retiring the Over/Under Bet

    About two years ago, I mentioned on Squawk Box that I was taking the Under on Non-Farm Payrolls. Since that appearance, you may have heard Steve Liesman or Mark Haines or Larry Kudlow talk about the Over or the Under. It was a cute device that made fun…

  15. TDM commented on Feb 1

    This means that productivity will need to be revised upwards, if we produced the same output with fewer workers. I hope Barry will reread his posts from October 2006 describing the “Absurdly Large” expected +810K revision from the same CES data so that he won’t contradict himself.
    The BEA shows that payroll taxes were up 3.6% in Q4, 4.8% for 2007, so total wage and job growth was still strong.

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