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Dueling data make it hard to size up the economy

One of the major stumbling blocks of timely economic analysis is a reliance on the integrity of government statistical data. This situation was underscored yet again last week with the release of regional employment estimates for October.

As discussed in previous Economy Track columns, monthly employment figures generated by the U.S. Bureau of Labor Statistics suggest that local hiring activity remains anemic—with October’s 0.1 percent year-over-year gain in private employment being the latest example.

However, examination of less timely but more comprehensive state unemployment insurance records suggests that local job creation may be much more robust—and indicative of stronger consumer spending fundamentals than implied by the monthly data series.

Unfortunately, these records, known as the Quarterly Census of Employment and Wages, are available only through March 2016, leaving an enormous time gap for companies and policy makers attempting to gauge the 2016 holiday shopping outlook or, more broadly, ascertain the true pace of economic momentum heading into the 2017 business planning cycle.

As shown in Figure 1, job growth implied by the monthly BLS data differs sharply from the QCEW series. The divergence is even more pronounced in various industry subsectors—particularly professional and business services, where the QCEW data show that local employment continued to expand during the early months of 2016 while BLS estimates suggest that industry headcount has contracted by 1,700 or 2.5 percent over the past year (Figure 2).

Taken at face value, the monthly jobs report implies that Rochester’s employment growth—and resultant consumer spending potential—is limping badly entering the final months of 2016.

This conclusion may be erroneous, however, given other recent economic signals.

Until problems in the monthly employment estimation process are rectified, decisions on the depth and direction of Rochester’s economic outlook will be fraught with complications.

Gary Keith is vice president and regional economist at M&T Bank Corp.

11/25/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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