Revisions to Nonfarm Payroll Employment: 1964 to 2011

Transcription

1 Revisions o Nonfarm Payroll Employmen: 1964 o 2011 Tom Sark December 2011 Summary Over recen monhs, he Bureau of Labor Saisics (BLS) has revised upward is iniial esimaes of he monhly change in nonfarm payroll employmen. Similar posiive revisions occurred o he iniial esimaes for Sepember 2010 hrough February Moreover, upward revisions o iniial esimaes also occurred in he immediae monhs following he mos recen NBER business-cycle rough of June This paern of posiive revisions suggess ha he BLS migh be having rouble pinning down iniial esimaes of job gains in he early sages of an expansion. I also cauions us agains placing oo much weigh on very early, someimes unreliable esimaes of macroeconomic daa. In his noe, I repor on he behavior of payroll employmen revisions a similar poins of pas business cycles. I use he Philadelphia Fed s real-ime daa se for macroeconomiss o analyze revisions o iniial esimaes for nonfarm payroll employmen over he period November 1964 o Sepember The key findings are: Iniial esimaes of job gains are biased downward by nearly 18,000 jobs. Tha is, over he enire sample period, he average revision o he iniial esimae of monhly job gains is 18,000 jobs, when he revision is measured from he iniial esimae o he esimae ha he BLS releases wo monhs laer. Noably, I find no evidence of bias due o periods of business-cycle expansion as a whole. However, I do esimae a saisically significan posiive bias over he mos recen expansion: The views expressed here are hose of he auhor and do no necessarily reflec hose of he Federal Reserve Bank of Philadelphia or he Federal Reserve Sysem. Tom Sark is he assisan direcor and manager of he Philadelphia Fed's Real- Time Daa Research Cener and can be conaced a Tom.Sark@phil.frb.org.

2 Over he period from July 2009 o Sepember 2011, he average revision o he iniial esimae of job gains is 36,000 jobs per monh. I find a small posiive (bu saisically significan) associaion beween he revision o job gains and he level of job gains. Mehodology I use he Philadelphia Fed s real-ime daa se for macroeconomiss o analyze he revisions o he BLS s iniial esimaes of he monh-over-monh change in nonfarm payroll employmen. 1 The daa se records he monhly hisorical levels of employmen (E), as ha hisory was repored by he BLS in is monhly repor on he labor marke. The BLS s repors on he employmen siuaion include an iniial esimae of employmen for he previous monh. They also include any revisions o he prior monhs. I compue monhly job gains as he monh-over-monh change in he level of nonfarm payroll employmen, E E 1. I focus on he cumulaive revision ha he BLS repors wo monhs afer i releases is iniial esimae. This wo-monh cumulaive revision o monhly job gains is Rev ( E E ) ( E E ), 1 Two Monhs Laer 1 Iniial where ( E E 1) Iniial denoes he BLS s iniial esimae of job gains and ( E E 1 ) Two Monhs Laer denoes he revised esimae, as he BLS repors i wo monhs laer. For example, in Ocober he BLS repored job gains of 103,000 for Sepember. Two monhs laer, he BLS revised is esimae o 210,000. The revision o job gains afer wo monhs is 210,000 minus 103,000, or 107,000 jobs (Table 1). Figure 1 shows he revisions over he period November 1964 o Sepember The revisions can be quie large and, in some cases, persisen. Clear sequences of posiive revisions follow he business-cycle roughs of November 1970 and June However, i is difficul o characerize he revisions in he monhs following he remaining roughs. I quanify he behavior of employmen revisions by esimaing he sequence of regressions shown below: 1 The daa ha I used in his paper and real-ime daa for addiional variables from he Philadelphia Fed's real-ime daa se for macroeconomiss can be found a: 2

3 (1) Rev e (2) Rev D e (3) Rev D70M11 D75M3 D82M11 D91M3 D01M11 D09M6 e (4) Rev ( E E ) e 1 Laes (5) Rev ( E E ) 1 Laes 1D70M11 2D75M3 3D82M11 4D91M3 5D01M11 6D09M6 e The firs regression relaes he revision (Rev) o a consan ( ) and a regression residual ( e ). The consan measures he average revision. The second regression adds a zero-one dummy variable ( D ) o he model. The dummy variable akes he value of uniy when he observaion on he revision falls ino a period of recovery from a recession rough. Noice ha he coefficien on he dummy variable ( ) measures he differenial effec of a recovery on he revision. I benchmark he period of a recovery o he number of monhs (29) since he mos recen rough in June Figure 2 shows he evoluion of he dummy variable (red line) and he periods of NBER-daed recessions (shaded areas). The hird regression replaces he dummy variable for all recoveries wih a disinc dummy variable for each recovery. The recovery periods are hose associaed wih he NBER s roughs of: November 1970, March 1975, November 1982, March 1991, November 2001, and June Noice ha I omi he brief recovery period following he rough of July The coefficiens aached o he recovery-specific dummy variables measure he marginal effec on he average revision of he corresponding recovery. The fourh regression measures he effec of he change in employmen ( E E 1) on he revision. I measure he change in employmen wih he observaions of he laes vinage available in he real-ime daa se (December 2011). The fifh regression allows he change in employmen and he recovery-specific dummy variables o affec he revision. Figures 3 and 4 show scaer diagrams of he revisions (y-axis) and he corresponding changes in payroll employmen (x-axis). I show he observaions for all monhs (red dos). I also isolae he poins ha fall ino monhs of recovery, as defined above (green dos). The scaer diagrams 3

4 sugges a posiive associaion beween revisions and he changes in payroll employmen. The associaion holds over he full sample period (Figure 3) as well as over he period beginning wih 1990 (Figure 4). Noe, in paricular, ha he larges negaive revisions are ofen associaed wih job losses. Empirical Findings Table 2 presens he resuls from esimaing regressions (1) o (5). On average, revisions o he change in payrolls are posiive and saisically significan over he period from 1964 o 2011 (column 1). The average revision is nearly 18,000 jobs per monh. However, noe ha his esimae masks some underlying variaion in average revisions over ime. Figure 5 shows he resuls when I compue esimaes of he mean revision using a rolling 60-monh window of observaions. The mean revision is almos always greaer han zero and nearly always saisically significan. (The horizonal blue shading indicaes he 90 percen confidence inerval around he mean.) The esimaes of he mean revision range from a low of -15,000 jobs per monh (June 1982 o May 1987) o a high of 53,000 jobs per monh (Ocober 1969 o Sepember 1974). The mos recen esimaes show mean revisions near zero. This resul reflecs, in par, large negaive revisions during he laes recession and nearly offseing posiive revisions during he subsequen recovery. Over he enire sample period, here is lile effec on he mean revision from recoveries as a whole: The esimaed coefficien on he business-cycle recovery dummy variable ( D ) is posiive (5.621) bu no saisically significan (column 2). This resul confirms he iniial impressions ha one ges from examining he revisions shown in Figure 1. As noed earlier, some recoveries have been associaed wih posiive revisions o payroll employmen. I find a posiive and saisically significan effec on mean revisions in he recoveries following he roughs of November 1970 and June 2009 (column 3). In he monhs following he November 1970 rough, he revisions averaged 54,000 jobs per monh. 2 Following he June 2009 rough, he revisions averaged nearly 36,000 jobs per monh. Revisions end o he upward side when job gains ( E E 1) hemselves are posiive. The effec is saisically significan bu small (column 4). Noably, when I combine he recovery-specific dummy variables and he employmen change in one regression, he resuls are qualiaively unchanged (column 5). 2 I derive his esimae and he nex one by adding he coefficien on he relevan dummy variable o he consan. 4

5 Table 1. Recen Monh-Over-Monh Changes in Nonfarm Payroll Employmen: Iniial Release, Two Subsequen Releases, and he Revision, Thousands of Jobs Observaion Iniial Second Third Revision Release Release Release 2009: : : : : : : : : : : : : : : : : : : : : : : : : : : : : Table Noes. The able shows he values for he monh-over-monh change in nonfarm payroll employmen over he period since he June 2009 rough. The daa are expressed in housands of jobs. The column labeled Iniial shows he Bureau of Labor Saisics' iniial release for he monh. The following wo columns (labeled Second and Third) show he values ha he BLS released one and wo monhs afer i released he iniial esimae. The las column (labeled Revision) shows he difference beween he hird release and he iniial release. 5

6 Table 2. Regression Resuls for Revisions o he Change in Nonfarm Payroll Employmen, Dependen Variable: Rev ( E E 1 ) Laer ( E E 1) Two Monhs Iniial (1) (2) (3) (4) (5) Consan (4.310) (3.236) (3.236) (1.241) (0.756) D (0.713) D70M (6.220) D75M (-1.433) D82M (-1.415) D91M (1.749) D01M (-1.168) D09M (3.197) E E (5.107) (4.881) (-3.276) (-4.271) (2.152) (-0.156) (3.177) (5.071) Table Noes. The able repors he resuls from esimaing equaions (1) o (5). The dependen variable is he cumulaive revision o he change in nonfarm payroll employmen from he iniial release o he release wo monhs laer. The sample period is 1964:11 o 2011:9. The number in parenheses is he HAC -saisic, derived using he Newey-Wes esimaor wih a runcaion lag of 24 monhs. Qualiaively similar resuls obain for runcaion lags of 0, 12, and 36. (Preesing resuls for condiional heeroscedasiciy and serial correlaion in he regression residuals indicae he presence of boh.) The variables beginning wih he leer D are zero-one dummy variables ha ake he value uniy when he observaion falls ino a period of NBER expansion, as defined in he ex. The variable E E 1 is he monh-over-monh change in nonfarm payroll employmen, measured using he daa as hey appeared in December The change in nonfarm payroll employmen and he revision o he change are expressed in housands of jobs. All daa come from he Philadelphia Fed s real-ime daa se for macroeconomiss. 6

7 Figure Cumulaive Revision o Monh-over-Monh Change in Nonfarm Payroll Employmen Iniial Release o Second Revision Revisions (000s) The figure shows revisions o job gains, in housands of jobs. Shading indicaes recessions. 7

8 Figure A Zero-One Dummy Variable Indicaes 29 Periods Afer Each Trough Shading indicaes recessions. The red line shows he zero-one dummy variable. The rough in July 1980 is omied. 8

9 Figure Change in Nonfarm Payroll Employmen: Revisions and Monh-Over-Monh Changes 1964: : Revisions (000s) Monh-Over-Monh Changes (000s) All Observaions Pos-Trough Observaions The graph shows he cumulaive revision afer wo monhs (y-axis) and he laes-vinage change in payroll employmen (x-axis). 9

10 Figure Change in Nonfarm Payroll Employmen: Revisions and Monh-Over-Monh Changes 1990: : Revisions (000s) Monh-Over-Monh Changes (000s) All Observaions Pos-Trough Observaions The graph shows he cumulaive revision afer wo monhs (y-axis) and he laes-vinage change in payroll employmen (x-axis). 10

11 Figure Mean Revision Over a Rolling 60-Monh Window of Observaions Mean Ploed a he Sample Endpoin 100 Mean Revision (000s) Sample Endpoin The graph shows he mean revision and he corresponding 90 percen confidence inerval. Shading indicaes recessions. 11