Just Released: Annual Revisions to Unemployment and Labor Force Statistics

Wednesday, March 3, 2021
Author: 
Andrew Berger-Gross

In a world awash in economic uncertainty, we rely on dependable sources of information to guide our decision-making. Data from government agencies such as the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) offer a reliable and unbiased reading on the condition of our economy. However, these data represent estimates and should be interpreted with caution when they are initially published, as they are often released in preliminary form and are subject to revision.

Each year around this time, the BLS publishes revised job growth and unemployment and labor force statistics for all states. These annual revisions incorporate information that was not available when the data were first published. We report on these revisions every year; see last year’s article for an example. While revisions are necessary to ensure our understanding of the economy is as accurate as possible, they can result in changes that are sometimes modest, and sometimes dramatic.   

In this article, we summarize recently published revisions to North Carolina’s unemployment and labor force statistics and discuss their implications for data users. A second installment in this series will cover revisions to our state’s job growth numbers.

The COVID-19 crisis led to historically high rates of unemployment in spring of 2020, followed by a rapid improvement in labor market conditions. Revised figures show that North Carolina’s unemployment rate reached 13.5% in April 2020, 0.6 percentage points higher than the preliminary estimate [Figure 1]. However, the revised data also indicate that we ended the year with a slightly lower unemployment rate than initially estimated.

Figure 1

Note that the trend depicted by these revised data is notably smoother than the preliminary numbers, with a clear downward trajectory between May 2020 and December 2020. This year, the BLS introduced a next-generation estimation model for state-level unemployment and labor force statistics as part of its annual revision process. This new model reflects the latest statistical methods and is designed to better handle the sort of rapid up-and-down swings we saw last year. The intended result moving forward into 2021 will be unemployment and labor force trends that are less volatile over time, hopefully giving us a more consistent picture of where our economy stands and where it is headed.

What do these revisions mean for data users? How can we understand what is happening in the world around us when economic statistics that are reported today are subject to revision at a later date?

It is important to acknowledge that no data point is perfect. Any effort to gauge economic conditions in real time is bound to be clouded by uncertainty. We recommend that data users consult a wide range of high-quality information sources to guide their decision-making. If all these indicators point in the same direction, then you can be relatively confident in the story they are telling. If these indicators contradict each other, then you should exercise caution before drawing conclusions about the state of the economy. 

We also recommend that you be judicious when interpreting month-to-month movements in economic data and, if possible, focus instead on long-term trends. Monthly data are often noisy, subject to revision, and represent only a snapshot of the economy. Long-term trends are much more stable, less affected by data revisions, and provide more reliable information about what is happening in our economy.