Yesterday, I went into some detail as to why a few people got the NFP data so (disingenuously) wrong. Then Invictus pointed me to this Economic Populist post, titled, Getting It Wrong on the BLS Employment Report. It came out late on Friday, hence why it may have been overlooked.

The long term chart via FRED shows the impact the Census has every 10 years on the civilian population. As you can see in the first chart below, this baseline adjustment to population is about 25% larger than 1989′s, but 35% smaller than 1999′s:

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Decennial Change Reflecting BLS incorporating Census Readings

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The next chart shows the BLS annual population benchmark to make sure their models reflect the latest estimates of population size, growth and characteristics. Note the monthly change between December and January every year — that is the yearly population adjustments.

These are not month-over-month changes, they reflect the adjustments made for the prior year showing up all at once in the month of January.

Hence, to quote the Economic Populist, “it is statistically invalid to compare December to January monthly changes. You simply cannot compare a change of a month, when one of those month’s includes a year of population adjustments.

Annual Change in BLS Population Measures

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Anyone who thinks that 1.2 million people suddenly dropped out of the labor force needs to take a basic statistics course. I wont hold my breath waiting for the usual suspects to admit their errors.

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Source:
Getting It Wrong on the BLS Employment Report
Robert Oak
Economic Populist Fri, 02/03/2012 – 21:46,
http://www.economicpopulist.org/content/getting-it-wrong-bls-employment-report

Category: Data Analysis, Employment, Really, really bad calls, UnGuru

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “Last word: BLS Decennial Census Adjustment”

  1. [...] Barry looks at how census hiring skews the non farm payrolls report and confuses people.  (TBP) [...]

  2. MayorQuimby says:

    BR…isn’t one of your mantras to be open to both sides of a given situation? To admit to being wrong?

    http://market-ticker.org/akcs-www?post=201495

    In additional as has been mentioned on numerous sites, labor participation AND income to receipts are both negative!

    This was a weak reportbut not terribly weak since there was sector growth. The seasonal adjustments are well, seasonal but they do need to be backed out as well.

  3. MayorQuimby says:

    Damned iPad…meant ‘numerous sites’ and ‘income tax receipts’

  4. OT:

    speaking of “Decennial Census Adjustment”..

    I find it amazing (given that this is an ‘Election’ Year) that so little (Media) coverage has been expended on the Decennial ‘gerrymandering’ of Congressional Districts..

  5. taketheredpill says:

    My problem with this report is the way the media ran away with it. In each cycle you can get an economic report, NFP, whatever, that is taken to be “the number”, proof that the trend is confirmed.

    The market reaction to this report was that the NFP numbers confirmed that the US economy is recovering, despite:

    1. Continued deterioration in participation that has been going on for years. The census adjustment didn’t change that as far as I know.

    2. Falling wages on a year over year basis, and the trend is getting worse. This is not what you see at a turn in the labour market.

  6. AtlasRocked says:

    Citing that all the previous reports were biased falsely positive because of this recent data accuracy improvement doesn’t make it an more rosy. If the data had been available, the prior reports would have looked worse – now that we have the data, let’s just put the lipstick on the pig and report it as a bookkeeping adjustment. Nothing to see here … move along now.

    The market took it positive and this is not a forum for preachers and moralists. Get on with the profit taking, folks. If we keep talking about it, the 99% might start calling us out as evil profiteers, making money off of others’ bad fortune.

  7. theexpertisin says:

    Trying to inject relevant facts days after an issue is presented in the 24/7 news cycle (the drive-by media, if you will) is an exercise in futility. For most, the case is closed and they are on to the next information burst.

  8. Old Rob says:

    As I mentioned in a previous comment on this issue, SOMEONE has a case of confirmation bias; big time.

    Government data is neither all wrong or all correct. I guess we can pick and choose.

  9. BobCarver says:

    One thing that stands out in the report is that, before seasonal adjustment, 2,689,000 jobs were lost. The seasonal adjustment was +2,932,000, with the result that the difference was +243,000. Now, when you have a seasonal adjustment that large (12 times the difference), there’s massive room for error. And, since a large part of the seasonal adjustment is due to bad winter weather which normally occurs in January, this year’s mild January probably meant fewer jobs were lost than the seasonal adjustment called for. Bottom line: this number cannot be trusted.

  10. PrahaPartizan says:

    Much of the complaint about the statistical adjustment the BLS implemented seems to be partisan carping about political reasons for such corrections. Anything which could potentially benefit the Obama administration becomes suddenly suspect. One should lack back over the history of the last decade to see who really might have benefited from playing with the BLS numbers. It seems passing strange that two years which had some of the largest negative adjustments, thereby improving the apparent economic picture, occurred under the previous administration when it was fighting for its life in 2004 because of covert failed policies and expecting to pass the baton to a member of the same party despite overt failed policies.

  11. Lukey says:

    While I agree that it is wrong to attempt to assign all the 1.2 million drop to January, as the drop occurred throughout the prior year, isn’t it still a fact that that many (more) dropped out of the labor force last year than what was counted in the monthly reports so, in the end we still lost all those folks from the ranks of the workforce? And isn’t it also still a fact that the labor force participation rate has continued its decline, as would be expected due to the afore mentioned dropping out? And with respect to the likelihood that baby boomers are happily removing themselves from the work force, isn’t the flip side that it is bad news that this trend isn’t opening up good jobs for younger folks? And is it not likely that the seasonal adjustment overstated the “seasonal” job losses due to weather (since the winter has been so mild), and is therefor overstating the “net difference” of 243,000?

    I think it is clear that we have stopped hemorrhaging jobs but we have yet to see a sustained resurgence in hiring, which makes this recent report a good but not a great one. Folks who are saying it is seem to be over stating the case. Until we see the labor force participation rate start to rise again, we are still on the way to an over burdened economy due to too few workers supporting too big a government.

    ~~~

    BR: Not prior year, prior decade. Its from 2000-2010

  12. [...] has been crushing the BLS flat-earthers the past few [...]

  13. PDS says:

    BR…according to his testimony today….it appears that the guy who actually does matter when it comes to policy making and how we should interpret the latest employment report agrees with the likes of Rick Santelli…ie his statement today…”the 8.3% unemployment rate UNDERSTATES job market weakness”…he, like Santelli, refers to the large # of people who dropped out of the workforce or who are underemployed…..BR…question…does that make the bernanke a tea partier?…he sure tempers last weeks NFP optimism..or should

    I’ll listen to the guy who is pushing the buttons before the talking heads in the media and blogosphere….hopefully this will end the bullish spin on what is still a lousy economy

  14. Frilton Miedman says:

    Instead of addressing real trends that are problematic such as flat wages & disparity, we’re yet again engaging in either offending or defending how “Obama is fixing numbers”….”birth certificate”…”death panels” …”socialism”….”unions”…”government takeovers”…”soaking the rich”…

    Divide & conquer, whatever it takes to get attention off the real problem….corporate profits are breaking records at the same time that consumer debt is also breaking records.

    America is the wealthiest country in the world yet we’re talking about our debt being at crisis proportion, meanwhile, knuckleheads like Santelli are fixated on wasting time and resources attempting to prove yet another “conspiracy” while we all ignore the real problems.

  15. sangfroid says:

    John from another blog states the following:

    “The BLS report, page 7:

    The adjustment increased the estimated size of the civilian noninstitutional population in December by
    1,510,000, the civilian labor force by 258,000, employment by 216,000, unemployment by 42,000, and
    persons not in the labor force by 1,252,000. Although the total unemployment rate was unaffected, the
    labor force participation rate and the employment-population ratio were each reduced by 0.3 percentage
    point. This was because the population increase was primarily among persons 55 and older and, to a
    lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force
    participation than the general population.”

    http://www.bls.gov/news.release/pdf/empsit.pdf

    I have downloaded the report from BLS site and the passage is indeed in there. You have to use the Find in Acrobat Reader to find the passage, can’t use IE Find.

    ~~~

    BR: See also http://www.ritholtz.com/blog/2012/02/bls-warned-about-census-adjustment-in-december-2011/

  16. [...] Last word: BLS Decennial Census Adjustment – TBP Participation rate shows a troubling trend – Sober Look Fiscal policy: What does [...]