The Updated Employment Picture

Each year, typically with little fanfare, the Bureau of Labor Statistics (BLS) releases revisions to historical employment data. While you may wonder if this means that history gets rewritten, it's really about making written history more accurate. Revisions are standard practice for not only employment data, but also other economic data. Revisions incorporate more complete underlying data that become available over time, as well as updates to data estimation procedures (most economic data are not based on complete counts; instead, they're based on samples that are used to generate complete estimates).

Employment revisions have gained heightened interest in the past couple of years. The pandemic created unique challenges for data collection and estimation, which has implications for the extent of revisions. Moreover, policymakers and analysts are keen to understand precisely how much we've clawed our way back from the largest jobs decline on record in spring 2020. This post focuses on recent revisions to monthly employment and unemployment data for Fifth District states to gain an updated picture on the extent to which the labor market has recovered.

How Much Has Employment Recovered Since the Onset of the Pandemic?

One headline data series from the BLS State Employment and Unemployment Summary is the level of nonfarm payroll employment — i.e., the number of persons on payrolls at establishments. Revisions to this series are based on an annual complete count of jobs that's used as a benchmark to adjust the monthly data. Revisions also reflect new estimates of business births and deaths and new seasonal adjustment factors.

At the end of last year, before data revisions, none of the Fifth District states had fully recovered to their pre-pandemic employment levels. For the most part, revised data tell a similar story with the notable exception of North Carolina. (See chart below.) It experienced a sizable upward revision: Payroll employment surpassed its pre-pandemic level in July 2021. Beneath the aggregate number of jobs in North Carolina, employment in most industries was upwardly revised, especially in education and health services.

Virginia and South Carolina payroll employment levels were also upwardly revised but remain below where they stood in February 2020. West Virginia, Maryland, and the District of Columbia have had somewhat weaker recovery tracks in employment than previously estimated.

Where Do Unemployment Rates Stand?

Another headline indicator that's important for understanding the condition of the labor market is the unemployment rate — calculated as the number of unemployed persons (those out of work and looking for a job) divided by the sum of those same unemployed persons and persons who are employed (this denominator is called the labor force). These data are based on a survey of households rather than establishments, and revisions reflect updated population data, revisions in other data sources, updated seasonal adjustment, and model reestimation.

Revised data for Fifth District states generally show that unemployment rates declined more steeply after their pandemic peaks than previously estimated, but they have been relatively flat since last year. The chart below shows that in Maryland, for example, the August 2020 unemployment rate was previously reported at 8.6 percent but is now estimated to have fallen to 7.2 percent by that month from a peak of 9.5 percent in April. Then, from July 2021 to December 2021, the Maryland unemployment rate was previously reported to have declined from 6 percent to 5 percent, but revised data show a smaller decline from 6.1 percent to 5.4 percent. This story is similar in other states in the district, with recent unemployment rates registering a bit higher than previously estimated.

What About People Who Left the Labor Force Altogether?

Besides the unemployment rate, another area of significant interest to analysts and policymakers is the extent to which labor force participation (LFP) is also rebounding. LFP rates — the size of the labor force as a percentage of the population — dropped sharply in most Fifth District states at the onset of the pandemic as workers left jobs (voluntarily or involuntarily) and stopped looking for work altogether (See previous post, "Gauging Unemployment Rates When Workers Are on the Sidelines.")

Prior to the data revision, no state in the district had returned to its pre-pandemic LFP rate. West Virginia had seen the greatest rebound, along with the District of Columbia and North Carolina to a lesser extent, while Maryland and Virginia had persistently low LFP rates. (See chart below.) Post-revision data haven't changed the low LFP picture for Maryland and Virginia. On the other hand, the LFP rates in West Virginia and the District of Columbia are now estimated to be very close to their pre-pandemic rates (although their rebound paths are noticeably different than previously estimated). Another notable feature of the data revisions is how sharp swings in the series — for example in South Carolina, Maryland, and Virginia — have been smoothed to address the effect of outliers.

Revisions are a part of life when it comes to economic data. They're part of the trade-off to having timely data like monthly employment and unemployment series when underlying data are not as complete at the time of release, and in the case of the pandemic, unique factors make data collection and estimation difficult in real time.

The recent revisions to payroll employment varied for Fifth District states in terms of the recovery toward pre-pandemic levels. North Carolina saw a significant upward revision, while other states had smaller upward or downward revisions. The revised paths of state unemployment rates generally show steeper initial declines in 2020 followed by relatively flat rates in 2021. Meanwhile, revised LFP rates remained persistently low for Maryland and Virginia; LFP rates in the District of Columbia and West Virginia have mostly rebounded to their pre-COVID-19 rates. We will receive February 2022 state employment and unemployment estimates tomorrow, March 25, which will provide another update on how employment is recovering.

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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.