Leaving Las Vegas But Devastating Atlantic City and Reno

Employment in casino hotels in the U.S. is on the decline.  Atlantic City, Las Vegas and Reno are seeing fewer visitors and lower revenues.  Part of this decline is due to the weak economy and stagnant middle class incomes.  The employment declines also reflect a long-term shift away from gaming in cities such as Atlantic City and Reno to other forms of gambling and entertainment.  Atlantic City casinos face competition from casinos in Pennsylvania, Delaware and Maryland, and Reno casinos have been hit hard by a very weak Nevada economy and increased competition from casinos in California and other western states.  As more states and cities allow casino gambling as a way to generate state and local government tax revenue, Atlantic City and Reno are likely to suffer even bigger declines in demand.  At one time these cities offered a relatively scarce commodity – legal casino gambling.  They now face sluggish demand because of a tepid economic recovery and increased competition.  Neither of these economic factors is likely to change soon.

The struggles of Atlantic City casinos have been well documented as earnings in the second quarter of 2013 are reportedly down 45% from the second quarter of 2012.  Employment in Atlantic City casino hotels in the second quarter of 2013 was nearly 35% below employment in 2000.  (For ease of exposition in what follows I use casinos to describe the industry group for “casino hotels”)  While employment in Las Vegas casinos is down only about 5% from 2000, casino employment in the rest of Nevada is down 43% from 2000.  Reno has the largest concentration of Nevada casinos outside of Las Vegas and employment there is down 44% since 2000.

As the following chart shows the sharp declines in casino employment in Atlantic City and Nevada outside of Las Vegas has occurred at the same time that casinos have been rapidly expanding outside of Atlantic City and Nevada.  (The chart normalizes employment to 100 in the first quarter of 2000 using the Current Employment Statistics series of the BLS.)


Employment in casinos outside of Nevada and New Jersey is up about 45% since 2000.  Vacationers who previously travelled to Atlantic City and Reno to gamble are instead visiting casinos along the Gulf Coast, or one of the 470 American Indian casinos located across the U.S. (including Connecticut, upstate New York, and parts of California).  Casinos outside of Nevada and Atlantic City employed 13.2% of all casino workers in the U.S in 2000 but now account for 21% of U.S. casino jobs.  Moreover casinos outside of Nevada and Atlantic City now employ more workers than all the casinos in Atlantic City, Reno, Laughlin, Lake Tahoe and all of Nevada outside the Las Vegas metro area.  This trend will continue as states and cities hungry for new sources of tax revenue allow more casinos to be built.  New casinos located throughout the U.S. will offer even more competition to Atlantic City and Reno.  The unemployment rate in 2013 has been an average of 13.2% in Atlantic City and 9.8% in Reno – both well above the U.S. rate.  Increased competition in casino gambling, the primary entertainment and tourist attractions in these cities, means that their local economies will continue to struggle.

Detroit’s Job Creation Problems

Detroit urgently needs job creation.  No American city faces more difficult economic problems than Detroit.  Even seemingly good economic news is misleading.  Detroit’s unemployment rate fell from 27.8% in the summer of 2009 to 16.3% in the most recent jobs report.  However, the apparent decline in unemployment is illusory.  Unemployment dropped because jobless residents either left the city or gave up looking for work; employment in Detroit actually declined by 1.8% between the first five months of 2009 and the first five months of 2013.

Some of Detroit’s economic problems are due to the mass exodus from the city.  Detroit’s population declined by 810,000 (about 54%) since 1970, or the equivalent of the population of Columbus, Ohio, the nation’s 15th largest city.  Enough residents have left so that the sprawling city of Los Angeles has a population density 63% higher than Detroit’s.  So many skilled workers have left Detroit that manufacturing businesses find it difficult to hire qualified workers even as the demand for their products has recovered in the past few years and the unemployment rate is 9 percentage points above the national average.

Detroit is No Longer the Motor City

In 1978 when the “Big Three” automakers had an 80% share of the domestic car market there were over a quarter of a million auto manufacturing jobs in Detroit.  Today, there are fewer than 38,000 auto manufacturing jobs in Detroit and suburban Wayne County, a decline of 85% since 1978.  Thirty five years ago Detroit was the home to one in four auto industry jobs in the U.S.  Today only 4.7% of U.S. auto industry jobs are located in Detroit and suburban Wayne County.  The decline in manufacturing jobs in Detroit is not limited to the auto industry.  Since 1978 there has been an 88% decline in employment in manufacturing industries other than motor vehicles.

A Longer Workweek in Manufacturing

At a time when many economists are concerned that most job creation consists of part-time jobs, the workweek in Detroit is getting longer.  The average length of the workweek in Detroit manufacturing establishments was 48.4 hours per week in 2012, about 6.7 hours longer (16.1%) than the U.S. average for manufacturing establishments.  The following chart shows that the average length of the workweek in Detroit’s manufacturing sector increased by 15.2% between 2003 and 2012, compared to a modest 3.2% increase for the U.S. overall.  (For ease of exposition the length of the workweek has been normalized to 100 in 2003.)


A substantially longer workweek means that during the economic recovery (from 2009 to 2012) about 44% of the increase in labor inputs in Detroit’s manufacturing sector were achieved by a longer workweek instead of job creation.  The following chart illustrates what might have happened had there not been increases in hours worked per employee.  Manufacturing employment in Detroit in 2012 would have been 15.2% higher had the length of the workweek remained constant (at 42 hours per week) from 2003 to 2012.  (Again for ease of exposition total labor inpouts in 2003 have been normalized to 100.)


Do Manufacturing Establishments in Detroit Face a Shortage of Skilled Labor?

There are a number of reasons why the length of the workweek in Detroit increased more substantially than in the remainder of the U.S.  If establishments in Detroit faced more economic uncertainty they may have chosen a longer workweek rather than incurring the costs of hiring additional workers.  If establishments in Detroit faced higher fixed costs of fringe benefits per worker, such as health insurance coverage, they may have also chosen to increase hours per employee instead of hiring more workers.  In addition collectively bargained agreements between manufacturing firms and unions may have specified that workers retained during previous reductions in force would see increased hours per week before new employees could be hired.

The sharp increase in the length of the workweek may also be evidence that manufacturing establishments in Detroit face a shortage of skilled workers.  If businesses find it difficult to attract qualified workers because of the exodus of skilled workers over the past decade, the best way to accommodate labor demand may well be to increase hours per employee instead of creating jobs.


The forecast for job creation in Detroit remains bleak despite the Federal government bailout of domestic auto manufacturers.  Detroit is no longer The Motor City as fewer than 5% of auto industry jobs are located there.  About 44% of the increase in labor inputs in manufacturing in Detroit has occurred due to a longer workweek instead of job creation.  Employers in Detroit are likely relying on a longer workweek rather than more job creation because of the exodus of skilled workers from the metro area as well as uncertainty about Detroit’s economic future.

Williston, North Dakota: Boom Town

Employment is growing at a faster rate in Williston, North Dakota than anywhere else in the U.S.  Williston is located in northwest North Dakota, about 70 miles south of the U.S.-Canadian border.  Northwest North Dakota is the center of the Bakken oil boom, which has dwarfed any other energy booms in North Dakota and Montana.  The employment boom in Williston over the past two years is one of the most dramatic since the U.S. Department of Labor began collecting local employment and unemployment data.

Williston is a small city (a micropolitan area according to the Census Bureau) where employment grew modestly from 1990 to 2005 and by 10% per year from 2005 to 2010, despite the global recession.  Growth in Williston really began to take off about two years ago.  The unemployment rate in Williston is 0.7%, or 1/11 of the U.S. unemployment rate.  Over the past two years employment has grown by more than 40% per year which is 26 times faster than in the rest of the U.S. and over 29 times faster than growth in Williston prior to 2005.  To put this into perspective employment in Williston is now increasing by the same number of jobs every four days that used to be created each year from 1990 to 2005.

The following chart shows that employment has doubled in Williston in the past two years.  Between 1990 and 2005 employment grew in Williston at an annual rate of 1.37%.  Over the past two years employment in Williston has grown by 2.86% per month.


There are growing pains associated with the employment boom.  The latest data from the Williston police department indicate that both property crimes and violent crimes have increased substantially in Williston, but roughly in proportion to the increase in employment.  The following charts compare the growth in crimes reported by the Williston Police Department to the growth in employment.



Williston is the quintessential energy boom town.  Employment is growing at an astronomical rate.  Wages are also rising — starting pay for high school graduates now tops $50,000 in the energy boom areas in North Dakota and Montana.  The average weekly wage in North Dakota has risen by 27.1% over the past three years, or 5.2 times faster than in he U.S. overall.  As employment has grown so quickly in such a short time the cost of rental housing has soared and the number of violent and property crimes have increased substantially.  These are just some of the growing pains associated with an economic boom.

Lessons from Elkhart, Indiana

In the 2008 presidential campaign then-candidate Barack Obama visited Elkhart, Indiana twice.  He visited again as president in February 2009 to make the case for his $800 billion stimulus package.  President Obama came to Elkhart three times because the city was in the midst of an economic freefall and seemed to epitomize the plight of the U.S. economy in 2008-2009.  Although Elkhart’s unemployment rate was 4.6% in 2007, by March of 2009 it would reach 20.2%.  Elkhart has bounced back from the recession much better than other cities.  Its unemployment rate is now 8.3%, slightly above the national average but dramatically lower than it was just three and a half years ago.

Indiana is the most manufacturing-intensive state in the U.S. with one of six private sector workers employed in manufacturing.  In addition, over 7 out of 10 manufacturing jobs in Indiana are in the durable goods sector.  Arguably, no city in the U.S. is more dependent on the production of durable goods than Elkhart, which has been called the recreational vehicle capital of the world.  While only 6.7% of private sector jobs in the U.S. are in durable goods manufacturing in Elkhart 43.6% of private sector workers are employed in the manufacture of durable goods, with the majority of those jobs in the production of recreational vehicles and motor vehicle parts.  Elkhart has been one of the top job creating cities in the U.S. since the recession ended.  In the past three years jobs in durable goods manufacturing have increased by 42.7% in Elkhart compared to 5.6% growth in the U.S. overall.

As a durable goods manufacturing center Elkhart’s downturn and recovery looks much more like the typical pattern for a deep recession followed by a brisk recovery.  Other cities hurt most by the recession (such as Riverside, CA and Las Vegas NV) suffered collapses in their residential real estate markets and residential investment.  These cities have not yet experienced the rebound seen in Elkhart.  The following chart indicates how the unemployment rate in Elkhart spiked much above the rates in Las Vegas and Riverside but has fallen more quickly since then.


There has been much discussion about why this recovery has been so slow and so weak.  Reinhart and Rogoff relied on cross-country and historical comparisons to argue that a slow and weak recovery is to be expected after a systemic banking and financial crisis.  It is difficult, however, to make consistent cross-country comparisons of unemployment rate fluctuations because of differences in the way each country measures unemployment.  Bordo and Haubrich limit their analysis to American historical data.  They find that “general recessions associated with financial crises are generally followed by rapid recoveries.”  They also conclude that one reason for the slowness of the recovery “is the moribund nature of residential investment.”

Another way to understand the 2008-2009 downturn and the subsequent recovery is by comparing unemployment rate fluctuations across U.S. cities.  Such a comparison shows that the unemployment rate has remained stubbornly high in cities where the housing bubble burst.  Durable goods manufacturing centers like Elkhart saw a big drop in the demand for the products they produce and a large increase in unemployment during the recession.  But manufacturing-intensive cities have recovered somewhat more rapidly – more typical of previous downturns.  That gives the edge, for the time being, to the explanations provided by Bordo and Haubrich.

70,000 Workers Displaced by Hurricane Sandy in New Jersey: Unemployment Rate May Reach 11%

Hurricane Sandy had a devastating effect on employment in New Jersey and a fairly large impact on employment in New York, as well.  A leading indicator of unemployment is the weekly report of new unemployment insurance claims.  A spike in new jobless claims means that a large number of workers were displaced from their jobs.  New Jobless claims have quadrupled in New Jersey and doubled in New York in the aftermath of Sandy relative to November 2011.  Using these data I estimate that Hurricane Sandy displaced 150,000 workers in the first two weeks after the storm hit, with 70,000 jobs lost in New Jersey and 50,000 lost in New York.  These job losses could push the November unemployment rate above 11% in New Jersey and above 9% in New York.

During the weeks of November 10th and November 17th (the most recent weeks for which detailed state data are available) about 96,000 jobless workers in New York filed for first-time unemployment insurance benefits, compared to about 48,000 new claims one year ago.  Similarly, almost 92,000 jobless workers in New Jersey filed for first-time unemployment insurance benefits during the weeks of November 10th and November 17th, compared to just over 24,000 new claims one year ago.  In the weeks after Sandy the rate at which workers lost jobs is about four times higher in New Jersey and twice as high in New York compared to November 2011.

The following charts compare the year-to-year change in new unemployment insurance claims the weeks of November 10th and November 17th and the corresponding change in claims for the previous 16 weeks (on average).  The charts indicate that new jobless claims remain very high in New Jersey while they have dropped recently in New York but remain above 2011 levels.  In both states new jobless claims in 2012 were consistently below 2011 levels until Hurricane Sandy hit.

Hurricane Sandy caused about 70,000 people to lose their jobs and file for first-time unemployment insurance benefits in New Jersey and 50,000 in New York during the weeks of November 10th and 17th.  These job losses are measured relative to the declines that would have been expected had the storm not hit the New Jersey coast.  Using similar methods, I estimate that about 30,000 additional jobs were lost in the rest of the country, possibly due to Hurricane Sandy.

The November jobs report (released on December 7th) is the first one after the presidential election and the first to include data gathered after Hurricane Sandy.  The storm’s displacement of 150,000 workers in the past two weeks is enough to increase the U.S. unemployment rate from 7.9% to 8.0%.  Hurricane Sandy is also likely to increase the unemployment rate to 11% in New Jersey (from its current 9.7%) and above 9% in New York (from its current 8.7%).  The November unemployment rate is based on worker’s labor force status for the week ending November 17th.  This means that continued job losses and displacement of workers in the second half of November, especially in New Jersey, will not factor into the November unemployment rate but could possibly cause the unemployment rate to increase further in December.

(Not) Leaving Las Vegas: When Unemployment Happens in Vegas the Jobless Stay in Vegas

Since February 2009 the unemployment rate in Las Vegas has averaged 13.1% and never dropped below 10.1%; it now stands at 11.5%.  Jobless workers have not left the metro area despite the persistently high unemployment rate and lack of job growth since the recession ended.  This stunning lack of out-migration, Las Vegas’ labor force of about 980,000 workers declined by less than 200 people in the past four years, is puzzling because there are better job prospects for the unemployed and underemployed in other parts of the western U.S. 

Every other state has a healthier labor market than Nevada and every major metropolitan area has a lower unemployment rate than Las Vegas.  The unemployment rate in North Dakota is 3.1% and has not been above 4.2% since February 2009.  Unemployment rates in Nebraska, South Dakota, Utah and Wyoming are 3.8%, 4.5%, 5.2% and 5.2% respectively.  The combined labor force in these states is more than 3.5 times larger than Las Vegas, and could easily absorb jobless workers leaving Las Vegas.  The labor forces in these relatively healthy states have grown by an average of less than 1.4% over the past four years.  In other words their labor markets are expanding at a steady but unspectacular rate.

The last four years stand in stark contrast to Las Vegas’ recent history.  Between 2004 and 2008 the Las Vegas labor force grew by 16.8%.  Between 2000 and 2004, a time of relatively slow economic growth for the U.S. overall, its labor force grew by 14.1%.   This means that about one-quarter of the Las Vegas labor force arrived between 2000 and 2008.  These recent arrivals came to a city in the midst of a real estate boom but have persevered through four years of high unemployment and plunging real estate values.

A comparison of Las Vegas and cities on the Gulf and Atlantic coasts that also experienced a real estate boom and bust in the past decade is informative.  Between 2004 and 2008 the labor force grew by 13.4% in Fort Myers-Cape Coral, Florida and by 12.7% in Myrtle Beach, South Carolina.  Since then their labor forces decreased by 1.3% and 4.2% respectively.  If the labor force in Las Vegas contracted at the same rate as it did in Fort Myers or Myrtle Beach, because unemployed workers left the city to find employment elsewhere, the Las Vegas unemployment rate would be 1.3 to 3.9 percentage points lower.

Labor forces have declined in many cities across the U.S., even those that did not experience a real estate boom and bust, but not in Las Vegas.  Much like the gambler who stays at the blackjack table believing his luck will change with the next shoe the people who came to Vegas for economic opportunities are hanging on and hoping that 2013 will be different.

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.

What Happened in Vegas? Its Not Better Off Than Four Years Ago

The question “are you better off than four years ago?”, first asked by Ronald Reagan in his campaign against Jimmy Carter in 1980, has a different answer for households in different parts of the country, and for workers who differ with respect to their occupation, age, education, race, gender and work experience.  The average answer to this question belies substantial inequality in changes in economic fortunes over the past four years.  There have been economic success stories even during the depths of the deepest recession since the Great Depression.  Some small businesses and start-ups have flourished.  The stock market and corporate profits have rebounded well in the past four years.  Many individuals have found work, moved from part-time to full-time work, received a promotion, or a substantial increase in their rate of pay.

At the other end of the spectrum, there is unlikely to be a group of workers more adversely affected by the recession and weak recovery than construction workers in areas where the real estate bubble burst.  Consider building construction workers in Las Vegas, Nevada.  Four years ago there were 17,500 workers employed in building construction.  Today there are only 5,100 meaning that employment has fallen by 71% over four years.

The Case-Shiller price index for residential housing in Las Vegas has fallen by 41% over the past four years.  This means that many of the unemployed and underemployed construction workers are underwater in their homes.  Moreover, given the glut of housing, the employment prospects for construction workers in Las Vegas is likely to remain weak for years to come.

What happened in Vegas, unfortunately, isn’t confined to Vegas.  There are a number of other cities and areas, from Riverside County, California to south Florida, that are casualties of the crash in real estate markets.  Many residents of these areas lost equity in their homes.  Others lost their jobs and have been underemployed for years.  Many small businesses, especially those dependent on real estate and construction, have failed.  So whenever pundits and journalists attempt to determine whether the typical American is better off than they were four years ago, remember that there are 300 million different answers to that question.  In some parts of the country the answer is clearly no, for far too many Americans.

Unemployment and Democratic Mayors at the DNC

Last week the Los Angeles Times ran an interesting story highlighting the conflict between the messages delivered by Republican governors in the key swing states of Ohio, Virginia, Wisconsin and the theme of Mitt Romney’s presidential campaign.  Governors Kasich, McDonnell and Walker all spoke at the Republican National Convention and emphasized the economic turnarounds experienced by their states under Republican leadership.  The Los Angeles Times reported that the talk of job creation and falling unemployment rates in these three states “delighted” President Obama’s re-election team.

Last night five Democratic mayors, from Charlotte, Chicago, Los Angeles, Newark and San Antonio spoke at the Democratic National Convention.  Four of these five metropolitan areas have unemployment rates above the national average of 8.3%.  The only metropolitan area of the five with an unemployment rate below the national average is San Antonio with an unemployment rate of 7.3%.  (The Bureau of Labor Statistics reports unemployment by metropolitan area not cities themselves.)

Taken together, these five metropolitan areas have a combined labor force of nearly 14.5 million workers, and 1.43 million of them are unemployed.  This puts the aggregate unemployment rate for the metropolitan areas represented by the Democratic mayors who spoke last night at 9.9%.

It wasn’t always this way.  In 2007 the unemployment rate in all of these metro areas was below 5%.  Fewer than 675,000 workers were unemployed in the combined metro areas in 2007, for an aggregate unemployment rate of 4.7%.

Will the Los Angeles Times recognize the conflict between the President’s re-election campaign message and the plight of the millions of unemployed, underemployed and discouraged workers in cities governed by Democratic mayors?  Perhaps not because only one of the cities (Charlotte) highlighted at yesterday’s DNC is in a swing state. 

Given the electoral map, the Presidential campaign is likely to pass by many people suffering from the steep recession of 2007-2009 and the weak recovery of the past three years.  I suspect that voters in these cities and states are looking for solutions from their mayors, governors and elected representatives, whether they are Democrat or Republican, and are less concerned with assigning blame for our economic woes.

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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