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BLS on Payroll vs. Household Survey

Posted By Barry Ritholtz On March 14, 2004 @ 8:09 pm In Finance,Politics | Comments Disabled

The Bureau of Labor Statistics [1] weighs in on the now thoroughly discredited Payroll vs. Household Survey pseudo-controversy.

Economists Arnold Kling and Steve Antler [2] each point to a recent Bureau of Labor Statistics analysis [3] on the divergence between the payroll survey and the household survey of employment. The BLS (led by the hardly apolitcal Elaine Chao) observes:

“As part of its annual review of intercensal population estimates, the U.S. Census Bureau determined that a downward adjustment should be made to the household survey population controls. This adjustment stemmed from revised estimates of net international migration for 2000 through 2003. In keeping with usual practice, the new controls were used in the survey starting with data for January 2004. Estimates for December 2003 and earlier months were not revised to reflect the new (lower) population controls.

…As a convenience to its data users, BLS created a research series that smoothes the level shifts in employment resulting from the January 2000, 2003, and 2004 population control adjustments.”
BLS [1]

Federal Reserve Chairman Alan Greenspan has noted that the Payroll survey is much more reliable than the household survey. That hasn’t stopped several economists — some of whom have an explicit political agenda — from arguing that the divergence between the two surveys is understating the strength of the economy.

As if Greenspan didn’t resolve the issue in his recent statements, the BLS itself has now weighed in. As these following charts make clear, when “modified to make it more “similar in concept and definition” to the payroll survey,” the divergement all but disappears.

The BLS did this by subtracting from the Household Survey:

1) Total agriculture and related employment;
2) Self-employed, unpaid family and private household workers (nonagriculture);
3) Workers absent without pay from their jobs.

BLS then added back in nonagriculture wage and salary multiple job holders.

The use of the broader standard (including farm and unpaid family workers) is what apparently created the divergement, as shown by the Green lines. Using data “similar in concept and definition” to the Payroll Survey “magically” eliminates the phantom missing jobs, as seen in the Red lines:

Household and Payroll Survey employment, Seasonally Adjusted, 1994-2004

Source: Bureau of Labor Statistics [3], March 5, 2004

The BLS notes about both charts (above and below): The household series presented here has been smoothed for population control revisions. The “adjusted” household series has been smoothed for population control revisions and adjusted to an employment concept more similar to the payroll survey. Shaded area indicates recession.

Household and Payroll Survey employment, Seasonally Adjusted, March 2001 – February 2004

Source: Bureau of Labor Statistics [3], March 5, 2004

The BLS has now formally resolved the Household/Payroll Survey discrepancy. Let’s see who has the intellectually honesty to step up to the plate with a big mea culpa. You may assume any of the original advocates of this now totally untenable position who adhere to it are little more than partisan hacks, and disregard them as appropriate.

Bureau of Labor Statistics, PDF [3]
BLS report, March 5, 2004


If the BLS file doesn’t download, here’s a local copy: PDF [4]

Employment Situation Explanatory Note [5]
BLS report, March 5, 2004


Mad props to Steve Antler [6] for the awesome pick up . . .

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URL to article: http://www.ritholtz.com/blog/2004/03/bls-on-payroll-vs-household-survey/

URLs in this post:

[1] Bureau of Labor Statistics: http://bls.gov/

[2] Arnold Kling and Steve Antler: http://econlog.econlib.org/archives/000420.html

[3] Bureau of Labor Statistics analysis: http://www.bls.gov/cps/ces_cps_trends.pdf

[4] PDF: http://bigpicture.typepad.com/comments/ces_cps_trends.pdf

[5] Employment Situation Explanatory Note: http://bls.gov/news.release/empsit.tn.htm

[6] Steve Antler: http://www.econopundit.com/archive/2004_03_01_econopundit_archive.html#107920944640841377

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