COMP NEWS – The Bureau of Labor Statistics (BLS) underestimated job growth by more than 626,000 jobs for the months of June through September. This indicates that the labor market’s pandemic recovery was much quicker than we initially thought.

The revisions have recast the narrative of a summer slowdown. In August, when economists expected a strong follow-up to the 943,000 jobs the economy added in July, the BLS announced the U.S. added only 235,000 jobs. Headlines dubbed it a “colossal miss” as job growth took a “giant step back.” Two months later, revisions based on additional data showed August jobs grew by 483,000, more than double the anemic original reading. It was the biggest positive revision in almost four decades. When it was reported the economy added just 194,000 jobs in September, headlines called it “ugly,” “dismal” and “disappointing.” A month later, a revision showed the economy had actually added 312,000 jobs in September.

What had appeared to be rather sluggish months of recovery were really found to be substantial. Unemployment numbers are difficult to measure and these findings show that economists still have a long way to go before accurate projections amongst unique circumstances will be possible.

Each month’s revisions simply reflect economists’ new best estimate, based on additional data. For example, when businesses report a surprisingly good month, such as this October, the seasonal adjustment algorithms look back on previous months with the benefit of hindsight. A good October likely didn’t come out of nowhere: the August and September estimates probably missed some growth. So, some of the jump in October is assumed to have occurred earlier, and a portion of the October gains are reallocated back to previous months.

 

Rather than showing that BLS has failed, the revisions are a tribute to the agency’s commitment to getting the numbers right, said Cornell University economist Erica Groshen, who served as BLS commissioner from 2013 to 2017.

You can read the full story about the US government’s miscalculation here.

For more Comp News, see our recent posts.

 

Comp News by CompXL

Comp News is brought to you by CompXL, the flexible compensation software provider that enables mid- to large-size organizations to implement competitive pay structures such as incentive compensation plans and multi-factor bonuses.