Thursday, November 10, 2011

New Numbers Hot Off The Presses.....

It was the second of September and the Bureau of Labor Statistics (BLS) released a particularly distressing jobs statement for the month of August. 
Zero growth in employment was the figure that jumped off the page – a number equally gloomy and unexpected.  Publications quickly made room in their headlines for this breaking news and commentators began tossing blame around to their preferred scapegoats. 
The only problem?
This number was revised up in the next month’s BLS report. And when I looked at the October info released last week, I found this sentence at the bottom of the page.
The change in total nonfarm payroll employment for August was revised 
from +57,000 to +104,000.
So initially there were zero new jobs, then 57,000, and finally 104,000. 
Now, that final figure isn’t particularly promising for a job market with 14 million unemployed workers, but the picture it paints is significantly different than the one we receive with the zero growth number.

I’m reminded of a graph illustrating the fluctuation of reported economic growth for the third quarter of 1990. The initial number published at the end of that year claimed an expansion of over 1.5% and Alan Greenspan, the Fed Chairman, famously proclaimed that the economy was not in a recession.  But, one year later, as tax returns were examined, this number moved into negative territory showing a contraction of 1.5%.

Follow the timeline a little further past the internet bubble, past 9-11, and past the invasion of Iraq, and you can see how as time advances so do economic measurements. Thirteen years after the initial report the 1990 growth rate was revised again, this time showing zero economic growth. 
The takeaway is that initial estimates are good starting points but sometimes aren’t very accurate.  Although it may be appealing and profitable for publications to run sensationalist headlines based on month-to-month changes, it’s better to wait a while before we get all worked up. 
Journalists need to remember that consumers and job creators base their decisions partly on what they hear in the news.  When the media machine sets its scope on inaccurate job numbers, for example, and a flurry of reports are published, consumer confidence is likely to drop. 
And self-fulfilling perceptions are something we often see in economies.  If enough people are skittish about a weak job market and curtail their spending, they can, in fact, cause the market to lose some of its vitality. 

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