Joe Ritter

English

Research Papers in Economics

NationalEconomicTrends
July 1997
The Tortoise Revises 
the Hare
Since the last issue of National Economic Trends,
payroll or establishment survey employment—one of the
most closely watched economic statistics—has under-
gone its annual benchmark revisions.  As the chart
shows, the most recent revision (57,000) was trivial, but
the previous revision (542,000) amounted to more than
one-sixth of the employment growth between March
1994 and March 1995.  Given the prominence of the
payroll data, it is important to know why large discrepan-
cies sometimes arise.
The Bureau of Labor Statistics (BLS) measures
employment in three ways.  First, it surveys households
and asks whether the residents are employed.  Second, it
surveys employers (establishments) and asks how many
people they have on their payrolls.  Third, it assembles
data from unemployment insurance (UI) tax forms that
must be sent to state UI offices by every employer cov-
ered by the UI program.  The process of benchmarking is
intended to reconcile the two employer-based estimates
by using the slow—but very accurate—UI employment
“tortoise” (ES-202 data) to revise the quickly available—
but relatively error-prone—establishment survey “hare.”
Paradoxically, it is mostly the tortoise’s fault that the
hare is inaccurate.  BLS decides which establishments to
survey based on the UI records, but drawing a sample in
this way means that the payroll survey will miss many
new employers whose paperwork has not yet found its
way into the UI records.  Without adjustment, therefore,
the payroll employment estimates will be too low.
BLS handles this problem by using a statistical model
and other information to estimate a “bias adjustment fac-
tor” for each month.  The bias adjustment is essentially
an estimate of how many jobs are created each month in
new establishments but missed by the sampling proce-
dure.  Bias adjustment factors are not necessary with the
data coming from UI records because, when they are
finally complete, they contain data from every employer
in the UI system.  
Each spring, the previous year’s March payroll
employment estimates are revised to be consistent with
that month’s UI data, as well as various other data on
employers who are not covered by UI reporting require-
ments.  The chart shows the effects of the 1995 and 1996
benchmarks.  For most industries, one-twelfth of the
March revision is added to not seasonally adjusted
(NSA) estimates for the previous April, two-twelfths to
May, and so on.  Therefore, for large benchmark revi-
sions like March 1995, the overall revisions between
benchmarks (April 1994 to February 1995) appear
wedge-shaped.  Because the March 1996 revision was so
small, the exceptions to this procedure (notably the “eat-
ing and drinking places” industry) dominate the revi-
sions, so no wedge shape is visible in the chart between
April 1995 and February 1996.
Starting with April 1996 estimates, BLS incorporated
new information into the bias adjustments for employment
estimates (these months will get their final revisions a
year from now).  The net effect of all of the revisions
was to lower the February 1997 NSAestimate by 54,000.
—Joe Ritter
Views expressed do not necessarily reflect official positions of the Federal Reserve System
Payroll Employment Benchmark Revisions
March 1995 and March 1996
Data are not seasonally adjusted
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1997 1996 1995 1994
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March 1995 Benchmark
March 1996 Benchmark

The tortoise revises the hare

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The tortoise revises the hare

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