Get to know your data: The employment survey and GDP revisions.

Get to know your data: The employment survey and GDP revisions.

Employment: Which Survey is More Accurate?

Recently there has been a good deal of misleading rhetoric over the use of two separate employment numbers produced by the Department of Labor. The problem has arisen because employment numbers from a survey of households seem to show a different employment picture than a survey of business establishments. Labor Secretary Elaine Chao has recently added to the confusion by saying that “experts may argue about the advantages and disadvantages of each survey.”

This issue is important because according to the payroll survey, employment has fallen by 2.4 million since the start of the recession in March 2001; while according to the household survey, employment has risen by 600,000 since the start of the recession.

Despite the claims by Secretary Chao and other conservative commentators, there really is no debate – the payroll survey is the more accurate of the two (in part because it’s sample size is over 600 times as large as the household survey); and serious government and non-government analysts – including the Federal Reserve – rely only on the payroll survey data.

The Economic Policy Institute has issued a report detailing the features of the household survey and the payroll survey, and explains why the payroll survey is the most accurate, and why there is really no serious disagreement over this issue.

In short, the report indicates that:

“The payroll survey has a clear advantage in measuring employment trends in the U.S. economy. The payroll survey employment numbers are based on one-third of total non-farm payroll employment and are benchmarked to the complete enumeration of non-farm payroll employment yearly. Overall, the payroll survey provides a more precise and less volatile measure of employment and employment trends than the household survey.”

GDP Revisions

This month the Bureau of Economic Analysis (BEA) released a comprehensive revision to the National Income and Product Accounts (NIPA) for the U.S., including data on gross domestic product (GDP) dating back to 1929.

This revision is part of ongoing efforts to improve the quality of economic measures.

One often cited revision is that 2000 third quarter GDP growth was shown as a slight negative (-0.5 percent) rather than a slight positive (+0.6 percent). Many commentators cited the revision as evidence that the recession started before the 2000 election. However, 2000 fourth quarter GDP growth was revised from 1.1percent to 2.1 percent indicating that the current administration inherited a stronger economy than previously thought.

Other highlights include:

• Over that past 20 years, GDP has grown at a 3.2 annual rate, the same a previously estimated.
• The 2001 recession saw a decline in GDP of 0.5 percent rather than the 0.6 percent decline previously estimated.
• Corporate profits for 2002 were revised upwards from 6.3 percent to 7.2 percent of GDP.