Economic indicators, as evidenced by Wall Street and economists, contradict Trump's skepticism towards employment figures
The monthly jobs report, closely watched on Wall Street and in Washington, has recently faced challenges due to declining response rates from businesses and government agencies. This has led to significant revisions in the data, a phenomenon that is not new but has become more volatile in recent years.
Hundreds of economists and statisticians are involved in compiling the report, following transparent, well-established methodologies. They work tirelessly to ensure the numbers are as accurate as possible. Most economists view the Bureau of Labor Statistics (BLS) as a nonpolitical agency, staffed by people obsessed with getting the numbers right.
Large revisions in the monthly jobs report data primarily occur due to delayed responses from surveyed businesses, uneven response patterns in industries and regions, recalculation of seasonal adjustment factors, population and labor force changes, data processing and staffing challenges, and methodological updates.
Delayed responses from businesses are a significant issue. The BLS surveys about 629,000 worksites monthly, but not all respond on time. Subsequent late submissions lead to significant revisions in following months. Certain sectors, such as trade-exposed industries, manufacturing, retail trade, professional and business services, and local government (especially education), experience atypical hiring or layoffs that contribute to sizable data adjustments.
Seasonal factors aiming to remove effects of holidays, weather, and school schedules are also recalculated monthly, influencing revisions. Shifts in population trends, influenced by immigration policies or other social factors, can distort labor force counts and precipitate revisions. Changes in data collection methods and possible staffing shortages at the BLS can add volatility to initial employment estimates.
Since 1979, the BLS has incorporated monthly and annual revisions based on more complete and accurate data, including official tax records which allow for benchmark adjustments. Large revisions are not new but have become more volatile recently, especially notable during and after the COVID-19 pandemic.
The report from the American Statistical Association states that "we are at an inflection point" and that thoughtful, well-planned investment is required to meet current and future challenges. U.S. government statistical agencies have seen an inflation-adjusted 16% drop in funding since 2009. Lawmakers need to make investments to modernize data collection for better response rates.
The BLS does an additional annual revision based on job counts derived from state unemployment insurance records. The commissioner of the BLS only sees the numbers after they are final, usually the Tuesday before the report comes out on Friday. Revisions to job totals can be large around turning points in the economy, such as growth or recession.
Recent revisions have sparked debate, with President Donald Trump firing the commissioner of the BLS, Erika McEntarfer, after questioning the reliability of the July jobs report. However, economists at Goldman Sachs have noted that the revised jobs data, which has attracted Trump's ire, is actually more in line with other figures than before the revision.
Ernie Tedeschi, an economic adviser to the Biden administration, has shown that while revisions spiked after the pandemic, they have since declined and are much smaller than in the 1960s and 1970s. Despite this, Friday's revisions to the jobs data were unusually large, with the largest revisions, outside of a recession, in five decades.
The government needs to release data in a timely manner for companies to have a monthly sense of the economy's status. Many economists and statisticians have sounded the alarm about declining response rates for years. Even the United Kingdom has suspended publication of an official unemployment rate because of falling responses.
In conclusion, large revisions in monthly jobs reports arise mainly from delayed and incomplete data from businesses, seasonal adjustments, sector-specific response patterns, and methodological updates, with periodic increases in revision magnitudes reflecting broader economic and survey challenges over the decades. Investments in modernizing data collection and improving response rates are crucial to maintaining the accuracy and reliability of these vital economic indicators.
- The government's nonpolitical agency, the Bureau of Labor Statistics (BLS), faces challenges in compiling the monthly jobs report due to declining response rates from businesses and government agencies.
- Delayed responses from businesses, such as trade-exposed industries, manufacturing, retail trade, professional and business services, and local government (especially education), contribute significantly to large revisions in the data.
- The BLS works tirelessly to ensure the numbers are as accurate as possible, and hundreds of economists and statisticians are involved in this process, following transparent, well-established methodologies.
- The report from the American Statistical Association states that "we are at an inflection point" and that thoughtful, well-planned investment is required to meet current and future challenges.
- The government needs to make investments to modernize data collection for better response rates, as underfunding of US government statistical agencies has seen an inflation-adjusted 16% drop since 2009.
- Despite declines in revisions since the COVID-19 pandemic, recent revisions to the jobs data have sparked debate, with the largest revisions, outside of a recession, in five decades, creating the need for timely data release for companies to have a monthly sense of the economy's status.
