Job Destruction in the Golden State

Perhaps no state has more protective labor laws than California.  Hourly employees in California are required to receive time-and-a-half overtime pay for hours worked over eight but less than twelve in a day and twice their regular hourly rate for hours worked in excess of twelve in a day, even if the employee works fewer than 40 hours in the week.  Employers who fail to properly classify workers into hourly and salaried positions and pay appropriate overtime compensation are subject to potential lawsuits and penalties.  Employers are also required to provide meal breaks to hourly employees for shifts in excess of five hours in length and are subject to lawsuits and penalties if meal breaks are not provided, are provided too late in the shift, or if the breaks are too short in length.  In the past two years most retail chains in California have been sued over failure to provide “suitable seating” to cashiers.  According to California’s Industrial Welfare Commission all employers must provide suitable seating to all employees “when the nature of the work reasonable permits the use of seats.”  The unintended consequences of “labor-friendly” laws are that labor services become more expensive and work is then more likely to be outsourced to states and countries with fewer labor regulations and lower labor costs.

One of the results of strict labor laws and regulations is that California has contributed no new private sector jobs to the U.S. economy in the past decade.  This is a dramatic reversal of a trend that started before the Department of Labor began measuring employment by states and areas.  The California economy grew rapidly from the 1950’s through the 1980’s as private sector employment more than tripled and about seven million private sector jobs were created over a forty-year period.  Employment in California continued to grow, albeit at a slower rate than in the rest of the U.S., in the 1990’s.  In the last decade private sector job creation in California came to a grinding halt.

The following chart illustrates decade-by-decade growth rates in private sector employment in California and the rest of the U.S. since 1952.  Employment in California grew much more rapidly than the rest of the U.S. from 1952 through 1982, and slightly more rapidly than the rest of the U.S. from 1982 to 1992.  The slowdown in employment growth in California began in the 1990’s as job growth in other states outpaced growth in the Golden State for the first time in decades.  Private sector employment actually declined slightly in California from 2002 to 2012.

The record of job creation in California over the past two decades is even more lackluster if one looks more closely at employment by sectors of the economy.  For example, it is more difficult to outsource health care services to other states and countries because most health care professionals must be located near their patients.  In fact, the only parts of the private sector that have contributed to job growth in California over the past ten years have been industries in the health care sector.  As the following chart shows, while employment in hospitals, nursing homes, and outpatient health care providers grew briskly in California over the past ten years, employment in non-health care industries has dropped by 2.7% since 2002.

There are now fewer manufacturing jobs in California than there were in 1957 when the Dodgers were located in Brooklyn, the Giants played at the Polo Grounds, and California had about one-third as many residents as it does today.  There are many reasons why California employment has been growing slower than in the rest of the U.S. for at least two decades.  High marginal tax rates and more stringent environmental regulations are often cited as factors that raise the cost of doing business in California.  “Labor-friendly” laws and regulations have also likely been responsible for increasing labor costs and encouraging the outsourcing of jobs to other states and countries.

Two Million Fewer Full-time Jobs Created in this Recovery Compared to George W. Bush Recovery

Last week Nobel Prize winning economist Paul Krugman wrote “The best hypothesis about the US economy this past year and more is that it has been steadily adding jobs at a pace roughly fast enough to keep up with but not get ahead of population growth.”  Professor Krugman is correct.  Total employment in the U.S. stopped its recessionary decline in February of 2010, whether measured using the Bureau of Labor Statistics (BLS) household or establishment payroll surveys.  In the two and a half years since then the economy has steadily gained enough jobs to just keep pace with population growth and demographic changes.  This would be good news if starting from a position of full employment.  But starting from a labor market trough, after the worst recession since the Great Depression, the job market performance over the past 30 months is best described as treading water.  We can be relieved that employment did not fall even more, but what we have seen for the past 30 months is an extremely weak labor market recovery.

The labor market situation must be dismal when even one of President Obama’s strongest critics on economic policy, Jim Pethokoukis of the American Enterprise Institute, has understated the weakness of this jobs recovery.  In a recent post Pethokoukis observed that, according to BLS establishment payroll data, the “Bush jobs recovery” created 5 million private sector jobs while the “Obama jobs recovery” created 4.6 million private sector jobs.  Although true, that is only part of the story.

Pethokoukis didn’t raise two important issues.  First, in the “Bush jobs recovery” household employment grew more rapidly than payroll employment.  Economists can’t provide an exact accounting of the differences between the two employment series, but much of the difference is due to new start-ups, small businesses and the self-employed.  Small businesses and the self-employed are either underrepresented or missed entirely in payroll employment totals and births of establishments are very difficult to track.  However, it is clear that many people were starting their own businesses or taking jobs with small businesses in the “Bush jobs recovery.”

A focus on payroll employment also ignores the difference between part-time and full-time work.  In addition to the millions of jobs lost in the recession, millions more moved from full-time to part-time work.  For the labor market to fully recover, underemployed workers in part-time jobs must find full-time work.  Consider a comparison of gains in full-time jobs during the two most recent recoveries.  The “Bush jobs recovery” began in August 2003 while the “Obama jobs recovery” began in February 2010.  The comparison is over a 30 month periods because the most recent data available are from August 2012.  The “Bush jobs recovery” created about 5.59 million  full-time jobs in 30 months compared to 3.51 million in the “Obama jobs recovery.”  The 2003 -2006 recovery was not as robust as previous recoveries but still produced two million (59%) more full-time jobs in 30 months than have been created since February 2010.

Welch Consulting has developed an employment index based on the BLS household survey that accounts for differences between full-time and part-time work, as well as the changing age and gender distribution of the workforce, population changes, and seasonal effects.  The index has moved up and down since February 2010 but is imperceptibly different from 30 months ago.  No change in the Welch Index means the economy created full-time equivalent jobs at the same rate as population growth.  In contrast the Welch Index steadily increased from 2003 to 2006.

A side-by-side comparison of the two recoveries is easier if one compares percentage changes in the index relative to the employment trough (beginning of each jobs recovery).  The following chart shows that after 25 months the Welch Index gained 2.3% in the “Bush jobs recovery” compared to 1.8% in the “Obama jobs recovery.”  Just five months ago the difference in the two recoveries was modest.  In the past five months nearly all of the gains in full-time equivalent employment (relative to a growing population) have been lost.  The full-time equivalent employment to population ratio is no better than it was in February 2010, at the end of a deep and prolonged recession.  In contrast in the “Bush jobs recovery” full-time equivalent employment growth was accelerating and grew much faster than the adult population over the corresponding time period (September 2005 to February 2006).  By 30 months into the recovery the index had grown over 3%.

Recognizing that President Obama inherited an economic mess, the amount of job creation on his watch has been disappointing.  What looked promising in early spring 2012 has stalled and the hope for a “recovery summer” faded long ago.  The job creation record under President George Bush’s leadership was not only better at this stage in the recovery, it was improving.

Any President has a limited impact on the rate of job creation.  Economists may disagree about the magnitude of the effect of tax policy uncertainty on job creation, but none would advocate a system where businesses large and small are uncertain of tax rates just four months in the future.  Tax policy is, however, the responsibility of both the President and Congress.  The President has a much greater impact on the regulatory landscape through the executive branch.  Labor market regulations, such as those in the Fair Labor Standards Act, can also discourage hiring (and encourage outsourcing).  It is difficult to tell, at this time, how much the Obama Administration’s expansion of regulations has had a chilling effect on hiring.

The Obama campaign will remind us that in early 2009, for about six months, the economy was losing 700,000 to 800,000 jobs per month.  The more pressing issue, however, is which candidate has better policies to help employment grow relative to our population over the next decade.  Some policies require bipartisan cooperation in a divided Congress.  Other regulatory reforms are more directly under the control of the executive branch.  Let’s hope the Presidential debates challenge the candidates to describe regulatory reforms that will reduce the headwinds and even help foster job creation in the U.S.

Employment Growth during Presidencies of Barack Obama and George W. Bush

The Welch Consulting Employment Index is 93.3 for August 2012, up 0.8% from August 2011 (seasonally adjusted).  An index value of 93.3 means that full-time equivalent employment (from the BLS household survey) is 6.7% below its level in the base year of 1997, after adjusting for both population growth and changes in the age distribution of the labor force.  The index has fallen over the past five months, it was 94.9 in March.  The index remains weak because part-time employment is higher than it has been historically and employment growth has barely exceeded population growth over the past two years.

The following chart compares employment changes in the first 44 months of the first terms of Presidents George W. Bush and Barack Obama.  George W. Bush took office when the employment index was 101.8, one of the highest values in the past 15 years, while the index had fallen to 96.9 by the time Barack Obama was inaugurated.   Nonetheless there has been a similar decline in employment during the first three and a half years of their administrations.  Between George W. Bush’s inauguration in January 2001 and August 2004 the employment index fell by 3.4%.  The corresponding change for President Obama’s first term is a 3.7% decline in the employment index between January 2009 and August 2012.

The similarities in the pattern of employment decline during these administrations becomes even more clear if the chart axes are adjusted to account for the differences in the state of the labor market between 2001 and 2009.

 

The first terms of the Bush and the Obama administrations have been characterized by steady declines in full-time-equivalent employment relative to the growth in the adult population.  The primary difference in the jobs record is that President Bush inherited an unusually strong labor market with a very low unemployment rate and a high rate of full-time equivalent employment. President Obama inherited a labor market that was already declining fairly rapidly.  After 44 months of their presidencies, however, the net percentage change in employment is remarkably similar across administrations.

Technical Note: Full-time equivalent employment equals full-time employment plus one half of part-time employment from the BLS household survey.  The Welch index adjusts for the changing age distribution of the population by fixing the age distribution of adults to the 1997 base year.  The Welch Index adjusts for population growth by fixing total population to its 1997 level.  Seasonal effects are removed in a regression framework using monthly indicator variables.

Why Has Job Growth Been So Slow? Fewer New Businesses

The rate of job creation over the past three years has been disappointing.  The Obama administration touts the fact that private sector employment has increased for 29 straight months.  But since February of 2010, when employment started to rebound, we have added 138,000 jobs per month (an annual growth rate of 1.27%).  Both parties agree that this is insufficient given the depth of the recession and the millions of unemployed, underemployed and discouraged workers in our economy.  An important reason for the disappointing growth in jobs is the slowdown in job creation from start-ups and new establishments.  The U.S. economy would create 2.65 million more jobs per year if new businesses were creating jobs at the same rate as in the 1990’s.

In 2011, for the first time in the 20 years that the Bureau of Labor Statistics has maintained these data, the number of jobs created at new establishments dropped below 5 million.  Job growth from newly formed establishments has declined by 38% since 1998, relative to total private sector employment.  In 2011 jobs created in new establishments accounted for 4.6% of private sector employment compared to 7.4%  of employment in 1998.  The decline in the share of jobs from new establishments has been steady over the past decade as shown by the following graph:

The dearth of start-ups is an important factor in understanding the anemic job growth in this recovery.  If new establishments were being formed at the same rate as in the 1990’s, the U.S. economy would be creating 221,000 more jobs per month (2.65 million more jobs per year).  Job creation would be 160% higher if job gains from new enterprises returned to the rates experienced in the 1990’s.

It is not clear why job growth from new establishments has dropped steadily over the past decade.  It is possible that each new business venture today creates fewer jobs in the U.S. due to outsourcing and technological change.  Regardless of the causes, job growth will not be robust as long as start-ups create fewer and fewer new jobs each year.  Changes in tax policy and regulations to create a business environment amenable for new businesses, that have historically been the engine of job creation, could help reverse this trend.

The Slow Growth in Full-Time Jobs

Full-time employment of adults age 20 to 54 has grown substantially slower than part-time employment during this economic recovery.

  • Part-time employment grew annually by 0.73% from May-July 2010 to May-July 2012.
  • Full-time employment grew annually by 0.22% from May-July 2010 to May-July 2012.
  • The fraction of workers with part-time jobs has remained above 16% since 2009, about 3% higher than the average from 2000-2008.
  • There are about 3.2 million fewer full-time workers than what was typical for the U.S. workforce from 2000 to 2008 (holding constant total employment).

The millions of under-employed adults age 20 to 54 are both a symptom and a cause of the weak economic recovery.

Another indication of the problem of under-employment in this recovery is evident in the BLS Displaced Worker Surveys of 2010 and 2012.  The survey focuses on workers who lost jobs they held for at least three years prior to being displaced.  A “displacement” is a job separation that occurred because:  “a plant or company closed or moved, there was insufficient work” or the “position or shift was abolished.”  The survey asks people who were displaced in the past three years whether they were re-employed and if so, whether their new job is full-time or part-time.  The 2010 and 2012 Displaced Worker Surveys indicate that an unusually high fraction of re-employed workers have only found part-time work.

The following chart illustrates the fraction of re-employed displaced workers who held only a part-time job in all of the Displaced Worker Surveys from 1996 to 2012.

A comparison across surveys indicates that:

  • More than 15% of workers who had found work after displacement from a longer lasting job were working part-time in surveys that asked about  job losses from 2007 to 2011.
  •  About 10% of workers who had found work after displacement from a longer lasting job were working part-time in surveys that asked about  job losses from 1993 to 2007.
  • Workers displaced since 2007 have been 1.5 times more likely to be re-employed at a part-time job.

The weak economic recovery has resulted in a stubbornly high unemployment rate, discouraged jobless workers from looking for work and caused the labor force participation rate to fall well below pre-recession levels.  There are also several million more adults now working part-time compared to the pre-recession labor market.  BLS surveys indicate that some of these “new” part-time workers were displaced from jobs they held for years prior to the recession of 2007-2009.  Consequently the national unemployment rate of 8.3% substantially understates the degree of underutilization of human capital in our economy.

Be Wary of the Seasonal Adjustment in the July Jobs Report

The Bureau of Labor Statistics (BLS) will almost surely report that payroll employment declined by over one million jobs on Friday, but it will all be erased by a procedure known as seasonal adjustment.  The headline number for job creation reports the change in jobs after making statistical adjustments that attempt to eliminate the employment fluctuations due to weather and other seasonal factors.  The July jobs report will have the second biggest seasonal adjustment (after December to January) of the year.  July is typically a much weaker month for payroll employment than June, because of seasonal factors.  Whether the headline number for job creation exceeds expectations or is viewed as disappointing may have more to do with the non-partisan statisticians at the BLS than the Federal Reserve, the Congress, or the Obama Administration.

Over the past decade employment fell between June and July by 1.33 million jobs, on average.  In contrast, seasonally adjusted payroll growth between June and July has been reported as an increase of 300, on average.  (That is 300 not 300 thousand jobs.)  This means the BLS has consistently adjusted a decline of 1.33 million jobs from June to July to be reported as no change at all, seasonally adjusted.  Put somewhat differently, even if there are no raw employment gains in Friday’s report, BLS statisticians will conclude that this is equivalent to the economy creating over 1.33 million jobs in a single month, after seasonal adjustment.

Last July employment was 1.3 million lower than it was in June, but that translated to an increase of 96,000 jobs after applying the BLS seasonal adjustment factor.  Although the BLS allows seasonal adjustment factors to evolve over time to reflect changing economic conditions, the June to July adjustment has been fairly stable over the last decade.  Nonetheless, even the slight difference between using the 2010 and 2011 seasonal adjustment factors for June to July is equivalent to a difference in 111,000 jobs for the headline payroll employment report on Friday.

Over the first three months of 2012 payroll employment was 1.56% higher each month, on average, than the previous year.  Over the past three months payroll employment was 1.34% higher each month, on average, than the previous year.  The labor market recovery has slowed.  Every economist and politician is looking to Friday’s report for an indication of whether the recent trend is likely to continue.

One monthly BLS employment report is noisy, subject to substantial seasonal adjustment, and should be interpreted with caution.  Sophisticated observers of Friday’s July report will be looking at both the seasonally adjusted headline number, as well as seasonally unadjusted figures (compared to July 2011), and revisions to the May and June reports, before reaching any conclusions about the direction of the labor market.

Public Sector Administration: A Safe Job If You Can Get It

Liberal economists and politicians lament the fact that public sector employment has contracted over the past two years while the economic recovery has sputtered.  The following chart compares the change in private sector and government employment from May 2008 to May 2011, and from May 2008 to May 2012.  Private sector employment fell by 5% between 2008 and 2011 but rebounded enough in the past year to stand 3.3% below its May 2008 level.  Public sector employment fell by much less between 2008 and 2011 but has dropped more in the past year and now stands about 2.3% below its May 2008 level.

Despite the budgetary problems faced by state and local governments, layoffs of teachers, police, and firefighters are generally not politically popular.  Advocates of more government spending often equate fiscal restraint with layoffs of educators and first responders.  But the 2.3% decline in government employment between 2008 and 2012 includes a wide variety of public sector jobs.

Have cutbacks in state and local government spending caused substantial declines in the employment of teachers, police and firefighters?  The Bureau of Labor Statistics Occupational Employment Statistics (OES) program provides annual employment counts and measures of the pay distribution by detailed occupation for nearly all nonfarm workers, public or private, who aren’t self employed.  The OES data are reported for May of each year and the most recent data are for 2011.  The OES can be used to measure the change in employment from 2008 to 2011 in key jobs, such as educators and first responders, that are primarily found in the public sector.  (For example, about 90% of elementary and secondary school students attend public schools and about 75% of college students attend public institutions so changes in the employment of educators from 2008 to 2011 are likely to be dominated by government budget cuts.)  Unfortunately the OES data can’t be separated by government and private sector, so the data are less informative for identifying government reductions in jobs that are primarily found in the private sector (e.g. clerical workers).

The following chart indicates that the employment of elementary and secondary school teachers fell slightly while the employment of post-secondary teachers grew by over 5% from 2008 to 2011.  The employment of school administrators grew by 1.7% for elementary and secondary schools and by 16.6% for colleges and universities.

The OES data can also be used to measure the change in employment of police, firefighters, and their supervisors.  The following chart shows that between 2008 and 2011 the employment of police and firefighters increased by less than 2% while the employment of their supervisors grew more than six times faster or by more than 9%.

Government spending advocates criticize fiscal restraint by asserting that teachers, police, and firefighters will lose their jobs if government spending decreases (as a fraction of GDP).  The OES data indicates that while employment in the private sector fell by more than 5% from 2008 to 2011, employment in some government administrative positions grew briskly.  From 2008 to 2011 the employment of police, firefighters and elementary and secondary school administrators increased slightly and teacher employment fell by only 0.4%, but the employment of police and fire supervisors increased by over 9% and the employment of administrators in higher education grew by more than 16%.

The public’s appetite for fiscal restraint is likely to depend on their understanding of which public service jobs are being trimmed and which are growing.  It is unlikely that voters support substantial increases in the employment of university administrators, with an average annual salary of over $97,000, and police supervisors, with an average annual salary of over $82,000, while the number of classroom teachers declined and the number of patrolmen barely increased.  But this is exactly what happened between 2008 and 2011.

The Long Road Back to Full Employment

It will take years of vigorous sustained economic growth to restore the U.S. labor market to anything close to “full employment”.  Consider the case of young adults age 20-24.  The unemployment rate for this age group has fallen from 15% to 12.9% over the past three years.  Nonetheless, the labor market for young adults is anything but healthy.  The labor force participation rate for adults age 20-24 has fallen from 73.4% to 70.8% since May 2009 because of the weak recovery.  Although there are 264,000 fewer unemployed workers age 20-24 than there were three years ago, there are also 566,000 fewer labor force participants than if the participation rate had remained steady.

As I have written in a previous post to this blog, there is an even more dramatic decline in the rate at which young adults are finding full-time work.  In May, 2000 54.3% of adults age 20-24 were employed in full-time jobs, but last month only 37.1% of adults age 20-24 were employed full-time.  If today’s labor market was comparable to 2000 full-time employment of adults age 20-24 would be higher by 3.75 million.  Some of these 3.75 million workers are currently working part-time while others are unemployed, and still more have left the labor force.

Young adults aren’t the only workers dropping out of the labor force or settling for a part-time job.  When a vigorous economic recovery finally arrives there will be millions of underemployed and unemployed workers and labor force drop-outs looking for full-time jobs.  Given the slack in the labor market and the rate of population growth, two years of employment growth of at least 500,000 full-time jobs per month would be required to restore the participation rate, the employment to population ratio, and the fraction of workers in full-time jobs to pre-recession levels.  In other words 24 straight months of growth about five times faster than what we have seen of late is needed to restore full employment.

May 2012 Welch Employment Index: The Labor Market Recovery Has Slowed

The Welch Consulting Employment Index is 94.5 for May 2012, up 1.1% from May 2011 (seasonally adjusted).  An index value of 94.5 means that full-time equivalent employment (from the BLS household survey) is 5.5% below its level in the base year of 1997, after adjusting for both population growth and changes in the age distribution of the labor force.  The index is up about 2.6% from its trough in July 2011, but almost all of the gains were in the second half of 2011.  The index is down slightly over the past three months.  The current value of the index is 6.9% lower than the pre-recession peak reached in January 2007.

The Welch Consulting Employment Index, disaggregated by gender, shows that the labor market recovery has been weaker for women than men over the past year.  Of course, men lost more jobs than women during the first year of the recession and therefore had more ground to make up in the past three years.  The index for men is 92.3 for May 2012, up 1.5% over the past twelve months, but down 7.7% from its pre-recession peak.  The index for women is 97.3 for May 2012, up 0.5% over the past twelve months, but down 6.1% from its pre-recession peak.  Finally, since President Obama took office in January 2009, the employment indices are down 1.6% for men and down 3.5% for women.

Technical Note: Full-time equivalent employment equals full-time employment plus one half of part-time employment from the BLS household survey.  The Welch index adjusts for the changing age distribution of the population by fixing the age distribution of adults to the 1997 base year.  The Welch Index adjusts for population growth by fixing total population to its 1997 level.  Seasonal effects are removed in a regression framework using monthly indicator variables.

Badgering Wisconsin’s Jobs Data

Next month’s election between Wisconsin Republican Governor Scott Walker and Milwaukee Mayor Tom Barrett is arguably the most significant statewide election in 2012.  Governor Walker created a firestorm of controversy when he signed a law limiting the collective bargaining rights of state and local government employees not long after his election in November 2010.  Since then over 900 thousand Wisconsin residents signed a petition for the Governor’s recall.  The economic health of Wisconsin is a key issue in the recall election.  Democrats argue that Republican budget cuts and the corresponding decline in state and local government employment have hurt the state’s economy, while Republicans argue that more fiscal discipline and the promise of lower taxes and regulations will increase Wisconsin’s economic growth rate.

 In the past few days the debate in Wisconsin has shifted to an argument over the reliability of competing jobs data series.  The Democrats point to the widely used establishment payroll survey that estimates monthly employment.  The payroll survey oversamples larger employers but has a difficult time tracking the births of new establishments that are (by definition) not part of the sample frame.

The Republicans, led by Scott Walker, note that the Quarterly Census of Employment and Wages (available since 2001), shows stronger employment growth than the establishment survey.  There is no question that a Census of employers provides more accurate information than a survey.  In fact, the survey data will eventually be revised according to benchmarks provided by the Census.

The problem is that Wisconsin politicians are impatient and the Census data are not available as quickly as the survey data.  The latest official Census figures are only available through September 2011, while the most recent establishment survey is reported through March 2012.  Earlier this week Governor Walker presented preliminary fourth quarter Census data that showed annual employment growth through the end of 2011 while the payroll survey indicated a loss of jobs over the same period.

The following chart, using data from the BLS website, presents comparable non-seasonally adjusted data from the Census and payroll survey.  The employment levels from the Census and establishment survey have a correlation coefficient of .985 over the past decade.  This is not surprising because the Census data are used to benchmark the payroll survey.  Nonetheless, the two series appear to begin to diverge in the second half of 2011.

The next chart illustrates the annual percentage change in the two employment series.  Year over year changes are presented (e.g. the percentage change in employment from January 2001 to January 2002 is reported in January 2012).  The percentage changes in the two series have a correlation coefficient of .99 over the past decade.  The payroll survey indicates that employment growth slowed in the summer of 2011 and turned negative in October 2011.  Employment has declined even further in the first three months of 2012 in the payroll survey.  In contrast, the Census data indicated that employment growth did not decline in the summer of 2011, and according to Governor Walker’s preliminary data, that trend continued throughout the last quarter of 2011.

The two employment series yield conflicting information about employment growth in 2011.  This has generated some political controversy but when the final Census employment data are reported for the last quarter of 2011, they will be a benchmark for revisions of the payroll survey data.  When all revisions have been made the two series are likely to track closely in 2011 as they have throughout the past decade.

It is understandable that political rivals have different views about which policies are more likely to promote growth and prosperity.  It is unusual, however, for candidates to disagree about the reliability of economic data series.  Census data are more reliable than a survey.  The payroll survey provides a valuable, but somewhat noisy, indicator of employment changes that have occurred since the latest Census benchmarks.  Stronger employment growth in the Census data in the last half of 2011 may well be the result of a higher “birth rate” of establishments and start-ups that aren’t included in the payroll survey’s sample.

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