Posts filed under “Employment”
Sy Harding, author of Riding the Bear, writes: “In the fine print of the employment report each month, under a section titled ‘Reliability of the Estimates’, is this statement: ‘The confidence level for the monthly change in total employment is on the order of plus or minus 430,000 jobs.’
Given our recent lament about the precision of the monthly NFP data, even we found that hard to believe. So I went to the most recent release, and scanned:
What do you know! There is was in BLS print:
Statistics based on the household and establishment surveys are subject to both sampling and nonsampling error. When a sample rather than the entire population is surveyed, there is a chance that the sample estimates may differ from the "true" population values they represent. The exact difference, or sampling error, varies depending on the particular sample selected, and this variability is measured by the standard error of the estimate. There is about a 90-percent chance, or level of confidence, that an estimate based on a sample will differ by no more than 1.6 standard errors from the "true" population value because of sampling error. BLS analyses are generally conducted at the 90-percent level of confidence.
For example, the confidence interval for the monthly change in total employment from the household survey is on the order of plus or minus 430,000. Suppose the estimate of total employment increases by 100,000 from one month to the next. The 90-percent confidence interval on the monthly change would range from -330,000 to 530,000 (100,000 +/- 430,000).
These figures do not mean that the sample results are off by these magnitudes, but rather that there is about a 90-percent chance that the "true" over-the-month change lies within this interval. Since this range includes values of less than zero, we could not say with confidence that employment had, in fact, increased. If, however, the reported employment rise was half a million, then all of the values within the 90-percent confidence interval would be greater than zero. In this case, it is likely (at least a 90-percent chance) that an employment rise had, in fact, occurred. At an unemployment rate of around 5.5 percent, the 90-percent confidence interval for the monthly change in unemployment is about +/- 280,000, and for the monthly change in the unemployment rate it is about +/- .19 percentage point.
Yes, its true: Zero was within the 90% confidence interval for the monthly change for nearly every month for the past 2 years!
Harding states this is nearly double the prior fudge factor.
Employment Situation: OCTOBER 2006
BLS, Friday, November 3, 2006.
This is another of our new features: Blogger’s Take. It is inspired by — a nice word for stolen — the WSJ’s Economist’s Take, which they post after major economic data releases.
We wanted to do something a bit more informal: Looking at different subjects a bit more in depth, and take in some perspectives from a broad variety of bloggers (as opposed to a narrow slice of Wall Street Dismal Scientists.
Here are our first half dozen responses to the question: "What Up With Employment?"
"A striking characteristic of the US non-farms job data since the trough of 2002 is that recovery growth is the weakest since records began in 1939 (uncertain BLS September revision notwithstanding). Even the brief and frail recovery between the 1980 and 1981 recessions was stronger. It may be that growth has not yet peaked – but that would make this jobs recovery the slowest to pan out on record.
Moreover, the latest non-farm payrolls data paints a picture of deterioration, particularly in construction and related industries. Whilst both the unemployment rate and hourly earnings data stuck out as good news, the fact is they are lagging indicators. The Fed has ammo to hold on this data; but should coming months show job losses (not outlandish) they might still choose to wait on clearer inflation (and BLS) data before contemplating the wisdom of cuts."
- Rawdon, Capital Chronicle