Wigderson: Poor Benchmarking, Fed Takeover of Data Gathering, Leads to Faulty Jobs Numbers from BLS

Why the numbers just aren’t working

By James Wigderson
Special Guest Perspective for the MacIver Institute

When the monthly unemployment numbers for Wisconsin from the Bureau of Labor Statistics came out earlier this month, the numbers did not look good. According to the Current Employment Statistics program survey (CES), Wisconsin lost 13,200 jobs in June. The private sector in Wisconsin lost 11,700 jobs. Wisconsin ranked last in the nation for the change in employment for the month of June.

These are grim statistics, and Governor Scott Walker’s critics were ready to pounce like state Senate Democrats on new Capitol office space. Assembly Minority Leader Peter Barca told CBS News, “It’s clear we need to roll up our sleeves and work together to make rapid job creation and closing the skills gap our top priority.”

However, as dismal as the numbers looked, Wisconsin officials again criticized the method used for benchmarking the survey. The BLS uses two quarters to revise, or “benchmark,” the survey. Wisconsin officials believe that three quarters should be used, as it was until 2011.

In a letter to the BLS, Secretary Reggie Newson wrote, “Regrettably, we continue to see indications that the 2012 CES series for Wisconsin- which as you know is affected by the previous benchmarking -continues to deviate from other economic indicators. The first opportunity to rectify this won’t be until the next round of benchmarking in early 2013. We strongly believe the integrity of the CES data series would be dramatically improved if the BLS were to use three quarters of data for its next benchmarking process, as was the practice prior to 2011. Based on feedback from other states, we are not alone in this belief.”

As Newson’s letter indicates, Wisconsin is not alone in this belief. Minnesota officials have also been critical of the monthly BLS numbers. In an interview in May with Minnesota Public Radio, Steve Hine, the director of Labor Market Information for the Minnesota Department of Employment and Economic Development (DEED), said he estimated the CES numbers Minnesota saw in April were 40,000 jobs short.

“So there’s been this growing doubt. In Minnesota, you know this is a rough ball park estimate, we seem to be 40,000 jobs short by this survey compared to this full count that we’re starting to see, and that’s the situation in Wisconsin.”

The full count Hine referred to is the Quarterly Census of Employment and Wages (QCEW), a census of a state’s employers that economists recognize as more accurate than the CES. Because of the delay in reporting those figures, it is not as well known or as widely cited as the CES. However, the CES only uses a sampling of employers (less than 2% in Minnesota, less than 3.5% in Wisconsin) to estimate what employment as a whole is for a state.

The QCEW received attention during the gubernatorial recall election earlier this year when Governor Scott Walker’s administration released the QCEW early. Unlike the CES, which showed Wisconsin losing 22,700 jobs in 2011, the QCEW showed Wisconsin actually adding 27,811 jobs. Democrats tried accusing Walker of “cooking the books” when his administration released the more accurate numbers.

BLS monthly unemployment numbers have been controversial since the federal government took over compiling them in 2011 from the states. The federal government previously paid the states $12 million to compile the data. In a cost-saving move, the federal government took over the function.

At the time of the takeover, the National Association of State Workforce Agencies sent a letter to Senator Tom Harkin and Senator Thad Cochran on the Committee on Appropriations
Subcommittee on Labor, Health and Human Services, saying the change would, “…diminish the accuracy, clarity, and credibility of the program and degrade the ability of states to assist job seekers, local businesses, policymakers and others.”

They added, “The CES program is a unique data series requiring the knowledge of State analysts about local labor markets. It is a capability BLS does not and will not possess.”

Newson’s recent letter to the BLS had more modest goals in mind rather than returning the program to the states. He asked them to consider changing the benchmarking for the CES to three quarters, and received an encouraging reply. On Thursday the BLS replied that they are now considering the change.

“BLS is currently researching the feasibility of benchmarking through the third quarter. While the research is not yet complete, preliminary results suggest that we probably will be able to update the CES estimates with QCEW data through the third quarter with the next annual benchmark scheduled for publication in March 2013. BLS will work with the CES Policy Council to make a final determination in the coming weeks.”

So we may finally see monthly numbers that would follow the quarterly census numbers more closely, just in time for the 2013-2014 election cycle.