Overstated Job Growth & the Annual Establishment Survey Benchmarking

Tomorrow, we find out just how much the B/D adjustment overstated true job creation in 2007. Every year, the Annual CES benchmark revisions are published in the February NFP. It has all the makings of a potential disaster.

To quote the BLS:

Benchmark revisions reflect a re-anchoring of CES sample-based estimates to incorporate near universe counts of employment. These comprehensive counts of employment, or benchmarks, are derived primarily from employment counts reported on unemployment insurance (UI) tax reports that nearly all employers are required to file with State Workforce Agencies.

In other words, the hypothetical Birth Death adjustments should have no impact. 

Here’s Floyd Norris’ take on other, recent, BLS adjustments:

"The American economy appears to have created far fewer jobs this
spring than has been reported so far, a new government report indicated
yesterday. That could provide further impetus for the Federal Reserve
to lower interest rates when it meets Dec. 11.

The report included a sharp downward revision of the government’s
estimate of personal income growth for the second quarter. Because the
changes were made as soon as better employment figures were available,
the revisions made it seem likely that figures on job creation are also
likely to be revised downward in coming months.

The new report concluded that personal income from wages and
salaries grew at an annual rate of 1.6 percent in the second quarter,
far below the 4.5 percent that had previously been estimated."

Note that the personal income data are based in part on BLS Establishment Survey. This income statistics revision implies that tomorrows benchmark revision of NFP may be quite substantial.


Tomorrow, we’ll look into January’s shocker of a B/D adjustment — invariably negative due to holidays . . .


Estimates May Have Overstated Job Growth   
NYT, December 1, 2007

Technical information: Revisions to CES data for late sample reports, annual benchmarking, and other factors

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What's been said:

Discussions found on the web:
  1. Stuart commented on Jan 31

    I don’t trust the BLS one damn bit. Perhaps overly cynical, probably not. Even though the B/D model has contributed the overwhelming majority of the ENTIRE job growth over the past month, ludicrous…still I am expecting them to show none, zero, nil adjustment and 100,000+ jobs for January. I won’t believe one bit of it, but as usual, they are the official figures and the media will run with them like NO tomorrow. Hey, after-all, if they’re official they have to be correct. Kudlow will be impossible to bear tomorrow afternoon. In fact, CNBC will be impossible to bear. Hope I am wrong, but wait for it..

  2. Stuart commented on Jan 31

    oops, that should’ve said over the past year. BLS & CNBC shills gets blood boiling.. gotta gear down..

  3. Crim Jamer commented on Jan 31

    What’s with Cramer. I have watched him the last two weeks b/c my son finds him “silly.” Anyway, just LAST week I heard him say that he thought we were in a recession, and just tonight I heard him say that we’ve bottomed in this cycle and we’re on our way up.

    Has this EVER happened in American history…a one week recession, with a V-shaped bottom, and onto the next bull market?

  4. E commented on Jan 31


    It’s different this time.

  5. Winston Munn commented on Jan 31

    “Estimates May Have Overstated Job Growth”

    I think this headline is a misprint. It should have read:

    May Estimates Overstated Job Growth, But Then, So Did June, July, August, September…

  6. Karl Smith commented on Jan 31

    Well I think we know that BLS misses turning points. Got killed to day on market open purchases of QID, SDS and SFX. Perhaps tomorrow will be a better (worse) day.

  7. Steve Barry commented on Jan 31

    “oops, that should’ve said over the past year. BLS & CNBC shills gets blood boiling.. gotta gear down..”


    I loved watching Maria Bartiromo cheering the market on with her usual, “look at that market rally” and her laughing. At one point she said market up 250!!! and it had already dropped to 200. If anyone has 10 minutes, here is Maria on Celebrity Jeopardy…she got shutout and her answer of “computer worms” is an all-time classic.

    Maria B. On Jeopardy

  8. Winston Munn commented on Jan 31


    I believe these market conditions are more condusive to trading individual stocks – not so much upward thrust on a weak stock when the market advances big or downward pressure on a good stock when the market flames out.

  9. Senator Charles Schumer commented on Jan 31

    (202) 224-5171


    With a Looming Recession, JEC to Address New Jobs Report from Bureau of Labor Statistics and Assess Economic Impact Schumer to Welcome Newly-Confirmed BLS Commissioner Keith Hall to First Congressional Jobs Hearing

    Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee (JEC), will hold a hearing on the newly released Bureau of Labor Statistics’ (BLS) monthly employment figures with Commissioner Keith Hall TOMORROW, February 1, 2008 at 9:30 am in the Dirksen Senate Office Building, Room 106. The hearing, entitled “The Employment Situation in January 2008” will address the new jobs report and previously weak jobs reports in light of a potential recession. The hearing will also address chronically-low job creation during this administration and examine revisions to payroll figures for the past several years to be made that morning. With a recession looming and the unemployment rolls growing, Dr. Hall is expected to provide insight on labor market trends and conditions in a deteriorating

    (NOTE: Senator Schumer’s staff has been briefed on BLS ways & means, particularly the jobs created by the Net Birth/Death Model. )

  10. kk commented on Jan 31

    It’s often the anticipation of a recession that depresses stock prices, not the actual recession. Time will tell on this one.

  11. kk commented on Jan 31

    Steve Barry
    I was thinking the same thing when I saw Maria gloating today. You would think she would know better. Cheering the market is bad karma. Respect the opposing view, and keep your head down.

  12. Estragon commented on Jan 31

    Alas, the revision will likely pass into history with little comment and less reflection. The monthly numbers we were so worked up about in 2007 may have been wildly wrong, but that’s now “backward looking”.

  13. Francois commented on Jan 31

    Probable blog entry for tomorrow @ TBP:

    “Jobs Reports: El Stinkissimo!”

  14. Crim Jamer commented on Jan 31

    So…everybody knows this…so it’s discounted, right?

    Like, when they say they are looking for 80K jobs they’re talking 80K above any revisions.

    Mark Zandi often makes a point about this birth death model–is there a REAL whisper number that could considerably disappoint Mr. Market?

  15. ac commented on Feb 1

    The market looks overbought right now interestingly.

    January 2001 created 200,000 plus jobs……..after revisions.

  16. bt commented on Feb 1

    Crim: I nike your lame ;-)

    Markets want to see weak numbers. The weaker the better so they can beat Bernanke into dropping rates yet another time. Like, report comes out at 8:30 am. Dow futures drop down 100 instantly. Bernanke comes in front of TV and drops big time. Rick Santelli looks at him and says “The Chairman has no Pants.” Ben looks down and realizes he dropped his pants, not interest rates.

  17. Crim Jamer commented on Feb 1

    Thanks for the feedback…here’s another bottom call…two in a day. Is this really JP Morgan’s position…no recession? I’m flabbered…

    “The market is telling us that the stocks (Russell 2000) have bottomed and a recession isn’t going to happen,” Thomas Lee, U.S. equity strategist at the New York-based bank, said in an interview.

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