The federal government may have seriously underestimated the impact of the recession on some of the major states and undercounted job losses across the United States by more than 2 million, according to an analysis by California officials.
Payroll tax filings in California, New York and other states indicate an extraordinary free fall in jobs in late 1990 and early 1991. California has suffered its worst job losses in more than half a century, according to these records. The U.S. government may have underestimated this plunge in California alone by more than 500,000 jobs, according to California officials.
"To me it's very obvious that the recession is far, far deeper than the [Department of Labor] figures are indicating," said Ted Gibson, principal economist with the Department of Finance in Sacramento, Calif.
The surprising reports -- while far from definitive -- are gaining attention because they are based on statements filed quarterly by almost all private employers. By contrast, the Department of Labor's widely quoted jobs data come from smaller surveys that may not fully detect sudden, sharp swings in the economy for many months.
The payroll tax figures not only raise questions about the accuracy of information relied on by U.S. policy-makers as the recession gathered steam in 1990 and 1991, but also may provide a clue as to why consumer confidence last year fell to the lowest levels in a decade, according to economists in government and the private sector.
"There must be something rotten in Denmark with those national numbers, because we haven't gone through a mild recession," said Allen Sinai, chief economist with the Boston Co. "I think what the jobs data in states like California is finding is much more telling."
The nation's jobs picture is officially drawn from findings by the Department of Labor's Bureau of Labor Statistics, in cooperation with state agencies. At issue are the payroll employment statistics, which describe how many jobs are gained or lost each month.
Analysts in and outside government watch the payroll figures closely; many economists believe that they offer more insight into the economy's course than the unemployment rate. A puzzling and vast gulf seems to have opened, however, between the official payroll jobs totals -- meant to reflect the number of jobs in the economy -- and what employers actually reported to the government early last year.
Nationally, the disparity between the number of jobs actually lost since the recession began in mid-1990 and the official number, appears to exceed 2 million, Gibson said, led by apparent underestimates of the recession last year in California, New York, Massachusetts, New Jersey and Michigan.
According to an internal Bureau of Labor Statistics document, payroll tax records from New York last March suggested a loss of more than 400,000 jobs that had not been counted in official labor statistics.
"The federal figures are too optimistic and they come too late," said Claudia Hutton, a spokeswoman for the governor's budget office in New York, where budget planners "have gotten burned" by federal revenue projections that proved too optimistic. "In New York, I don't think it's an exaggeration to say that just about everyone knows someone who has lost a job."
When asked about the gap, labor statistics officials said that they annually reviewed their statistical assumptions about job totals. Bureau officials in Washington have said that they may revise the nation's job count downward by 650,000.
"We've usually trusted those [Bureau of Labor Statistics] numbers in the past and this data suggests there are problems with them," David Wyss, an economist at DRI-McGraw Hill in Lexington, Mass.
There are fewer jobs out there right now than the official statistics say there are, he added, noting that "It's something that makes us very nervous right now."