Job losses in state twice as bad as thought
Employers' tax filings reveal a labor market clobbered by recession
Sam Zuckerman, Chronicle Economics Writer
Wednesday, February 19, 2003
California lost more than twice as many jobs than official statistics show during the recent economic downturn, many of them in the ailing technology sector, according to confidential state data obtained by The Chronicle.
The data, derived from unemployment insurance tax payments by employers filed quarterly with the state, show that California had 106,000 fewer nonfarm jobs at the end of June than official Employment Development Department figures indicate. The June quarter is the most recent period for which the tax filing data are available.
State officials who have seen the most recent tax filing figures say they show that California's recession did more damage to the labor market than previously thought, especially in manufacturing and business services, where technology jobs are concentrated.
Official EDD statistics show 14,658,900 jobs in California outside the farm sector as of June 2002, a relatively mild loss of 99,000 jobs from the peak registered in January 2001. The unemployment insurance tax filing data indicate that the job loss was 205,000, or more than two times larger.
"We've been trying to figure out why personal income tax receipts have been falling so rapidly," said Brad Williams, senior economist in the California Legislative Analyst's Office. "You don't get there from the official (data) series."
Many ordinary Bay Area residents readily embrace the idea that official state figures underestimate job losses.
"I just came back from a reunion dinner for a company I used to work for," said San Francisco software consultant Jeff Johnson. "Out of 100 people, about a quarter were out of work. Based on the people I know, (the official job loss number) has got to be an undercount."
Experts noted that the overestimation of payrolls represented less than 1 percent of total jobs in the state in June, well within the expected range of error. EDD is "doing a good job of tracking this stuff," said labor specialist Nan Maxwell, chair of the Economics Department at California State University at Hayward.
EDD spokeswoman Suzanne Schroeder said that the tax filing data were confidential and declined further comment.
At issue is the monthly California nonfarm payroll jobs number prepared jointly by the EDD and the federal Bureau of Labor Statistics.
WHERE FIGURE COMES FROM
The payroll jobs figure -- one of the most widely watched of all economic statistics -- represents the total number of Californians outside the farm sector who are collecting paychecks. It doesn't include independent businesspeople and the self-employed.
Experts consider information from the tax filings to be more accurate than the payroll jobs number. The employer tax filings provide an actual count of employees, while the EDD payroll number is based on a survey of a sample of employers who are asked how many people work for them.
The EDD will use information from the tax filings to adjust official state job statistics at the end of the month when the department and the Bureau of Labor Statistics release their annual payroll jobs data revision.
NOT A PERFECT MATCH
The upcoming revision won't precisely match the tax data, though, because the department will only use filings made through March 2002. Statisticians also use other sources of information to make their adjustments.
Last year's revision found that California had 14,696,600 jobs in March 2001, a decrease of 79,500 from the previous estimate.
The tax data are not sorted geographically, so no information is available about where the extra job losses occurred.
However, the data are classified by industry. Manufacturing and business services respectively showed job losses above official figures of 79,000 and 51,000 in June, adding up to more than the 106,000 gap. That's because all the remaining sectors of the economy actually lost 24,000 fewer jobs than reported in official statistics.
TECH SECTOR TO BLAME
The concentration of surplus job losses in manufacturing and business services is evidence that the technology sector accounts for a large part of the job gap. Williams estimates that about 20,000 of the extra manufacturing job losses and roughly a third of the business services losses occurred in the tech sector.
Until recently, EDD distributed the tax data widely to researchers and government officials in a document known as the interim series. About a year ago, the department restricted distribution to a handful of state budget officials.
"This interim series has been an enormous help to those of us who try to forecast revenue," Williams said.
EDD officials say they will resume distribution of the tax data after they complete a conversion now under way to a new industry classification system.
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TRACKING JOBS
-- Official payroll jobs estimate
Based on a monthly survey of a sample of several thousand employers. Less than 1 percent error is considered acceptable. Calculated 14,658,900 California nonfarm jobs as of June 2002.
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-- Quarterly unemployment insurance tax filings by employers
Confidential and unofficial. Based on an actual count of employees. Has a much smaller margin of error. Calculated 106,000 fewer jobs than official statistics as of June 2002.
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-- Annual readjustment
Once a year, at the end of February or beginning of March, state and federal statisticians adjust the official payroll jobs estimate based on tax filing data and other information. The readjustment has a one-year lag, meaning that at the end of this month data will be updated through March 2002. Last year's readjustment resulted in a downward revision of 79,500 in the total number of nonfarm jobs in the state. Source: Chronicle research
E-mail Sam Zuckerman at szuckerman@sfchronicle.com.
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