Arnold Kling  

Measuring Employment

Recession Dating... Jobs and Tax Cuts...

Tim Kane has written a timely paper on the behavior of the payroll survey, which is the source of data showing disappointing employment numbers. The key point is this:

The payroll survey double-counts any individual who changes jobs during the pay period in which the worker is on two payrolls. Such turnover overcounting would normally be irrelevant if (1) the turnover rate was stable over time and (2) pay periods were stable. But if turnover rates increase or pay periods expand from weekly to monthly, overcounting will inflate the payroll count of total employment.

The stronger the economy, the more likely it is that workers will change employers and be double-counted in this way. Thus, near the peak of a boom, the payroll survey will overstate employment by more than it overstates employment when the economy is operating below capacity.

As I read this analysis, it says that the some of the jobs "lost" since 2000 were not really lost--they were double-counted in the first place. I presume that the same holds true for aggregate hours worked, which is the measure that I use to construct my preferred measure of labor capacity utilization. Perhaps labor capacity utilization was overstated in 1999, so that the decline since then is not as pronounced as my data would have indicated. By the same token, measured productivity growth since 1999 would be overstated.

For Discussion. What policy implications, if any, does Kane's analysis suggest?

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CATEGORIES: Labor Market

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The author at PrestoPundit in a related article titled The Voodoo of Economics. writes:
    Lies, Damn Lies and Employment Statistics. UPDATE: Arnold Kling take a look at the key issue.... [Tracked on March 8, 2004 12:54 AM]
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Lawrance George Lux writes:

Kane's analysis would halve the actual loss of Jobs accredited to Bush, this is true if the data can be proved, but it also established a Core unemployment unaffected by the Bush stimulus package. It simply states there has been a loss of over one million Jobs under the greatest stimulus ever provided by the Government. It sustains a proposition I have made in several Works so far: Keynesian stimulus will not work, and can actually impair economic performance, if the Resource Recovery sector is working consistent with normal Production levels. lgl

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