Vol. 1, No. 3, Published July 6, 2015
California Jobs: A Moving Target
By Jordan G. Levine
Each month, California�s Employment Development Department (EDD) releases estimates of employment at firms located within the state. Researchers, academics and policymakers universally rely on these estimates to understand recent developments in the state�s economy. And, while these statistics provide us with the timeliest measures of what is happening in California labor markets, they remain only estimates of current jobs based upon a sample of firms that are surveyed each month. The figures can be, and often are, revised.
In a process known as the annual benchmark, the EDD recalibrates its survey-based estimates to more closely match the employment counts that each firm files quarterly in association with California�s unemployment insurance program. (See Figure 25.) While these data, known collectively as the Quarterly Census of Employment and Wages (QCEW), lag more than the monthly estimates, they provide a much more accurate picture of employment trends.
The result of this annual benchmarking process since the end of the Great Recession indicates that nonfarm job growth in California has been consistently higher than reported in EDD�s monthly releases. For example, during 2013, EDD reported that job growth had slowed from roughly 3 percent at the end of 2012 to 1.6 percent by the end of 2013. However, the 2014 benchmark showed that California averaged more than 3 percent growth throughout 2013. Similarly, the 2014 and 2015 benchmarks showed a significant slowing of job growth during the second half of each year, which was later revised to indicate more robust and consistent growth in each subsequent benchmarking process. Even the most recent benchmark revision, which was released in March 2015, shows that the survey-based estimates are already tracking below the QCEW by between 40,000 and 60,000 jobs. In other words, California is currently creating jobs at a 3.5 percent pace, considerably faster than the 3.1 percent rate of growth reflected in the EDD�s monthly release.
The revisions have put California squarely at the head of the pack relative to virtually every other state when it comes to creating new jobs. Clearly, this does not diminish the substantive long-run challenges the state faces, including excessively high housing costs, growing long-term financial obligations such as pensions and retiree health care costs, eroding infrastructure, an ongoing drought, and regulatory and tax reform, among others. However, brighter trends in the state�s labor market illustrate that California has significant strengths to leverage.
As the effects of the Recession fade, California will find itself with more financial wherewithal, allowing the state to begin addressing some of its long-term policy issues. Good policy begins with good data. If the jobs data � one of the most important indicators we have of the health of the economy � continues to point in the wrong direction toward the end of a year, it will be difficult for policymakers to make key decisions regarding budget priorities. It is critical that the U.S. Bureau of Labor Statistics recalibrate its model to better reflect ground-level realties in the Golden State.
Jordan Levine is the director of economic research at Beacon Economics. The opinions in this article are presented in the spirit of spurring discussion and reflect those of the author and not necessarily the Treasurer, his office or the State of California.
Comparison of Annual Benchmarks