jobs an illusion in the us

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    Data revision confirms weak U.S. jobs picture


    Friday, October 3, 2:47p ET


    WASHINGTON, Oct. 3 (Reuters) -- A warning by the U.S.
    Labor Department that it expects to revise down past
    employment data pours cold water on the view of some
    economists who believed the jobs market had been
    improving for some time, analysts said on Friday.


    Statisticians at the Labor Department said they expect to
    revise down U.S. payroll employment by about 145,000
    for the March 2003 reference month -- effectively showing
    even greater weakness in the sluggish labor market than
    previously thought.


    The downward adjustment surprised Wall Street, which had
    been rife with speculation this week that Labor would adjust
    the figures up, bringing payrolls more in line with another
    survey which has shown a recent improvement in the job
    market.


    "The expectation was that this revision would be positive,
    that we would be looking at a number in excess of 300,000,"
    said Anthony Chan, chief economist at Banc One
    Investment Advisors.


    An upward revision would have brought the so-called
    establishment survey, a poll of businesses that has shown
    a loss of 1.0 million jobs since the recession ended in
    November 2001, more in line with a smaller household
    survey of employment which has shown a 1.4 million job
    gain.


    Both surveys are part of the department's closely
    watched monthly employment report. Markets tend to focus
    on the payrolls count from the establishment survey, while
    the unemployment rate is derived from the household survey.


    The discrepancy between the two surveys has been a hot
    topic of late, even though veteran economists believe much
    of the discrepancy can be explained away by differences
    between the methods used in the two surveys and monthly
    volatility.


    Chan, who believes the larger establishment survey provides
    a more accurate picture of the job market, said the downward
    revision douses the argument that Labor was underestimating
    the job recovery with its establishment survey.


    "That gives more credence to the view that the weakness
    in the establishment non-farm payrolls is real," Chan said.


    James Glassman, senior U.S. economist at J.P. Morgan
    Chase Securities in New York, said the revision is equivalent
    to about 12,000 fewer jobs a month than originally thought in
    the March 2002 to March 2003 period.


    "Whichever survey you look at, employment has been pretty
    flat in the last two years, and there is no mystery why -- the
    economy has not grown" fast enough," said Glassman.


    Like many economists, he argues the discrepancies between
    the two surveys can be largely explained by the different
    methods used. Unlike the establishment survey, the household
    survey includes farm workers, the self-employed, unpaid family
    workers, private household workers, and people on unpaid leave
    among the employed, possibly boosting its count.


    "When you make adjustments to compare apples to apples,
    the differences between the two surveys are really quite small,"
    Glassman said.


    The so-called "benchmark revision" is an annual exercise
    by the Labor Department, designed to adjust historical data
    using more exact records that have come in since the
    preliminary results were released.


    The benchmark change will be instituted when a final
    measure of the revision is revealed in February. In the
    past, it had taken the department until June to make
    the changes.


    Labor said the 0.1 percent adjustment this year was
    small by historical standards, with benchmark revisions
    averaging 0.3 percent in the past 10 years.


    -END-
 
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