Friday, February 7, 2014

Statistical error in your favor: collect 600,000 jobs

A remarkable increase in U.S. jobs is buried in an otherwise unremarkable monthly jobs report.

The U.S. Department of Labor estimates that the country added a seasonally-adjusted 113,000 non-farm payroll jobs in January, a solid but by no means brisk growth figure.

However, the estimated number of jobs in January of 137.5 million was 600,000 higher that last month's estimate of 136.9 million in December.

The additional 500,000 jobs come from revisions that the government makes annually to its jobs figures.

The payroll employment figures are based on surveys of firms. The rosters for those surveys are drawn from records of existing firms and have trouble accounting for new firms that are created after the roster is drawn as well as existing firms that close. The government makes adjustments for these changes, but these adjustments tend to lag the actual changes, understating job growth in good years and job declines in bad years.

Each February the government compares previous years' survey numbers to other administrative records and readjusts the survey numbers. These adjustments added about 400,000 jobs to its estimates early in 2013 and about 500,000 to its estimates near the end of 2013.

On a percentage basis, the estimates don't change much--the revised December figure is only 0.37% higher than the original estimate. But even small percentages work out to big numbers when they are applied to large populations.

Overall, the Department of Labor estimates that annual job growth was 2.3 million last year instead of 2.2 million--about 10,000 extra jobs per month.

Sometimes mistakes can be good news.