Saturday, July 05, 2014

The Trustworthiness Of BLS JOLTS Data

Understanding the US economy requires access to good data.  It's temping to rely on the BLS Job Openings and Labor Turnover Survey (JOLTS) products.  I am not one to give in to temptation.  Analysts cannot merely assume that government data sets such as JOLTS are reliable.

I looked at the JOLTS ten-year data set for the quit rate.  That's the percentage of people who voluntarily leave a job in a given month.  The quit rate bottomed out in 2009 and has been climbing ever since.  A climbing quit rate should be a sign of a healthy economy as employed people trade up to better jobs.  The hires rate and turnover rate within JOLTS also track this trend.  The caveat is that BLS uses seasonal adjustment factors for this data, and the effects of later adjustments are summarized in BLS's revision tables.  The effects are typically small but they will matter in some sectors where employment forecasts matter.  Retailers who hire seasonally should be very interested in whether BLS seasonal adjustment factors create positive feedback loops in their own business models.

Shadow Government Statistics has reconstructed the nation's unemployment rate without the government's birth-death assumptions and other adjustments.  Using raw, unaltered numbers probably yields a more accurate understanding of the job market than using adjusted numbers.  Government economists should be very concerned with keeping the trust of the business community.  They can do so by jettisoning artificial adjustments from their statistical methodologies.