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HOW MANY PEOPLE WORK HERE, ANYWAY?


By Bryan Bezold
RCGA Director of Research and Chief Economist



Measuring employment is a difficult task, and The U.S. Department of Labor’s Bureau of Labor Statistics (BLS) has several data bases that try to do it. As strange as it might sound, they almost always report different levels of employment for the same area.

We can see this by looking at two of the BLS programs. The Household survey and the Establishment survey, or CES, are both released monthly. Although you might not realize it, you’ve probably heard of the Household survey because it’s used to calculate the unemployment rate for metropolitan areas, states, and the nation. The other monthly survey, the CES, is the source most commonly cited when economists want to measure total employment in the U.S. The CES is also the survey that RCGA has used for many years to measure St. Louis area employment (as we did in the December Economic Update). Both surveys are subject to revision as more data become available, and aren’t considered “final” until two years after their initial release.

These two numbers, the Household and CES measures of employment, are almost always different. For example, the Household survey reported total employment of 139 million nationwide in December of 2004, while the CES reported 131 million. There are good reasons why the surveys differ. In the case of the Household survey, data is gathered from a phone survey of households; in the case of the CES, businesses are surveyed. If you’ll pardon the cliché, it really is a case of “apples” and “oranges.”

And then there’s a “pineapple,” the Quarterly Census of Employment and Wages, or QCEW. The QCEW is a count of employment based on state unemployment insurance records, and is released every three months, with about a six month lag. Since it is based on an actual count rather than a survey, it is less subject to large revisions than the Household survey or CES. The QCEW does, however, have some clear weaknesses. There are several occupations and one entire industry (the railroad industry has a separate employment and retirement system) that aren’t even covered in the QCEW count. In January, the QCEW results for the St. Louis MSA for June of 2004 were released by the BLS, and were considerably lower than the estimates from the Household and Establishment surveys.

The three data bases—Household, CES, and QCEW—almost always report different employment totals, even after all the revisions are complete. For the St. Louis metropolitan area, the QCEW figure has been consistently lower than the CES and Household number for the past several years. As with the differences between the Household and CES surveys, there are some good reasons for this difference.

For the past seven years, none of the three programs have reported the same number, or rate of growth, in any given year. Apparently unaware that a difference is the norm, some local media outlets reported on the January release of June 2004 QCEW data by implying that the new QCEW results overrode the earlier estimates of employment in St. Louis.

In the case of the June 2004 data, the difference between the QCEW and the CES was larger than usual. The difference was about 52,000, where the average difference over the past seven years is around 17,000. Although this larger than usual difference does suggest that the CES numbers will likely be revised downward, rather than upward, it does not negate the CES results. Usually the QCEW and the CES numbers tell consistent stories, but right now they don’t. Or, more accurately, right now the two don’t tell the same story about June of 2004.

Bottomline: 2004 will ultimately turn out to be a year in which the St. Louis economy swung from employment losses to employment gains. A fancy way of saying that is that 2004 was an inflection point for the St. Louis economy. During these turning points in economies, it is more likely than usual for different data sources to tell different stories. Revisions to initial data releases are also more common, and larger, during these periods.

So if the employment numbers tell us conflicting stories, then how do we judge the performance of the region’s economy without waiting one or two years for the data to be revised? While we remember that, while the employment data is subject to revision, preliminary results from the CES showed year over year employment growth during every month of 2004, and that performance strengthened as the year went on. So revisions to the Establishment numbers might mean slower growth that started later in the year, but when all is said and done, the trend of net employment growth that the Establishment survey suggests right now will ultimately be accurate.

We also have other economic data points besides points besides employment estimates. The Fed’s Beige Book, released January 19th, reported continuing economic growth in the Eighth District, which includes the St. Louis MSA. McGraw Hill’s Dodge Construction Bulletin reports that through November, Building Construction was ahead of 2003’s pace by 26 percent. And The Institute for Supply Management’s manufacturing index reported solid growth in the
St. Louis area for much of 2004.

 

 

 


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