How Much Has The Mass. Economy Really Grown? | Revised numbers throw cold water on Bay State's employment picture for 2011
It appears the Bay State’s economy was not as special as we thought.
As monthly jobs numbers rolled during 2011, Massachusetts officials, companies and workers could take comfort in the news that the state was adding jobs, clawing back nearly 41,000 by year’s end.
But those gains were nearly erased in an annual revision of the figures, issued in March by the U.S. Bureau of Labor Statistics. The agency revises the numbers going back several years after incorporating data it receives from unemployment insurance programs.
The before and after in Massachusetts was stark: It turns out the initial estimates were four times too high. The state actually gained only 9,100 jobs for the year, the BLS said. That means the state grew its base of jobs by 0.3 percent instead of 1.3 percent.
Here’s how the numbers impacted Central Massachusetts:
• The Worcester area, which includes the city and its surrounding suburbs, gained only 2,000 jobs, according to data provided to the Worcester Business Journal by the Bureau of Labor Statistics. That number is way down from the original report of 7,700.
• In the Fitchburg-Leominster-Gardner region, where job growth was flat in the pre-revision numbers, post-revision data shows a loss of 500 jobs for the year.
• The Framingham area, which had created 4,600 jobs, actually gained 2,400.
But it turns out both state officials and economists, for some time, have been taking preliminary job creation numbers with a grain of salt.
Alan Clayton-Matthews, a Northeastern University economist and analyst for MassBenchmarks, a publication of the University of Massachusetts Donahue Institute, now takes other factors into consideration.
“We’ve been doing that more over time, as we’ve gotten burned by revisions and by strange patterns in the data,” Clayton-Matthews said.
Donahue issued a report in March after the revisions were released, saying the conclusion from the new numbers “materially changes our understanding of the Commonwealth’s economic experience in 2011.”
The institute said the revisions mean the state’s GDP grew 1.6 percent, not 1.8 percent, for the year. How that compares to other states will be known in June, when the government releases state-by-state 2011 GDP figures.
Clayton-Matthews ventured that changes in data collection methods implemented by the BLS early last year could be playing a role in the larger revisions. But he said there could be other factors, such as changes in survey response behavior by employers.
Though the revision was the biggest Gregory Bialecki, secretary of the state Executive Office of Labor and Workforce Development, has seen, he predicted that future revisions will bring the 2011 number back up.
He said other indicators such as exports and payroll tax growth suggest that the original BLS estimates were closer than the revised number.
Wherever the true number lies, Bialecki stressed that the state does not base any of its economic policies on monthly data.
“Fundamentally, the only way we can hope to influence things is by trying to affect the long-term competitiveness of the state,” Bialecki said.
Bialecki said the state’s role in calculating the monthly numbers is now minimal. “They hand the numbers to us and we announce them,” he said.
He noted that preliminary numbers for January and February show 14,500 new jobs, more than the total revised number for 2011.
“It doesn’t feel like we had a slow year last year and all of a sudden the last two months we were absolutely on fire,” he said.
A more complete and accurate picture of the Massachusetts economy could be better gleaned by analyzing metrics like payroll tax measurements, Clayton-Matthews said.
Nearly everyone pays them, which would help avoid the sample size errors that BLS runs into with its data collection, he said.
Madeline Schnapp, an economist who directs macroeconomic research for Trim Tabs Investment Research in California, said her firm’s national job numbers have historically turned out to be closer to the more finalized versions the BLS puts out months or years later.
Trim Tabs tracks income tax deposits to the U.S. Treasury to calculate its estimates.
“Typically there’s a pretty big gap, and then it moves closer to ours,” Schnapp said.
She acknowledged that BLS has a difficult task, but argued that tracking money flows is superior to survey data.
Will Massachusetts try to push a different method of data collection? Probably not, said Bialecki.
“I think it just means we have to take a broader view,” he said. “I think we’re accepting that this is the process they’re using.”
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