Job growth in Maryland tends to be under-counted

The Economy

February 05, 1996|By JAY HANCOCK

ACCORDING TO the newest data, Maryland's economy looks bad.

The state's in recession, if you believe the numbers. We seem to be losing jobs faster than we're creating them -- for the first time in five years.

Total state employment in December was 2,600 jobs less than in December 1994, according to the federal government's Bureau of Labor Statistics. In November the deficit was 1,800 jobs compared with the same month in 1994. That's a slide down from slight growth of 11,500 jobs -- 0.5 percent -- for August.

If you believe the numbers. And there's the rub.

Many economists think that state employment -- the best overall measure of Maryland's economy -- is still growing. Not booming, but growing. They believe that the latest government figures underestimate Maryland business activity.

Recent history shows that they may be right.

To understand why, it helps to look at how government statisticians count jobs.

The first look that businesses and policy makers get at state job growth comes from a monthly telephone survey of about 6,000 employers. It's a scientific sample of businesses and other organizations, and it yields inferences about total employment.

Maryland's employment statistics for November and December came from that survey. So did monthly state job figures going back through August.

But there's a problem. The survey tends to miss jobs.

Much employment growth is generated by new companies -- companies that aren't in anybody's phone book, companies that the government doesn't learn about until months after they hang out their shingle.

In years past, Maryland job counters inserted a cushion into initial estimates to represent the new jobs they presumably were missing, regional economists said. This "adjustment," derived from historic trends, slightly inflated reported job levels beyond what was turned up by the survey.

But during Maryland's last recession, the adjustment gave the state too much credit. The cushion was too fat.

There weren't as many new jobs as the surveyors had figured, and employment measures later had to be revised sharply downward -- 2.5 percent in 1991.

A political squall resulted -- made worse by the fact that the mis-estimates were compiled by state employees working for an image-minded governor.

Solid job statistics do eventually arrive -- new companies and all. Unemployment insurance records yield precise, accurate payroll counts. But they aren't available until many months after the time in question.

Because of the 1991 overshooting, Maryland job counters drastically shrank the new-job padding or eliminated it -- accounts vary. The result is that initial Maryland employment data -- including the November and December figures -- now assume that few or no new jobs are being created.

"They're not trying to be difficult," said Ann O'Brien Franklin, chief economist for the state Board of Revenue Estimates. "They're just not trying to overstate the employment situation."

Patrick Arnold is director of labor market analysis and information for Maryland's Department of Labor, Licensing and Regulation. The supplier of state job figures for the U.S. Labor Department, Mr. Arnold acknowledged that Maryland surveyors were off the mark in 1991 and have become more conservative since then.

There's still latitude for "analyst judgment" to add presumed new jobs to the figures, he said. "We try to take that into account."

But, he said, "it's overshadowed by the caution that we have in not wanting to overestimate."

So they underestimate. Or at least they have.

"For at least two years now, we've had upward revisions" when the solid, unemployment-insurance data came out, Mr. Arnold said. "And they've been reasonably small. But we're leery of going overboard."

The trend continued into 1995. The telephone-survey data showed that average Maryland employment grew 1.3 percent in January through June, compared with the same period in 1994.

But when the unemployment-insurance counts arrived recently, growth turned out to have been 2.3 percent -- a full point higher. That's a difference of 20,000 jobs.

"We're not sure what our final revision will be for 1995, but our pattern has been to revise upward in the neighborhood of 1 percent," Mr. Arnold said. A new sampling method should improve the estimates, he said. But meanwhile, "you can miss any vibrancy that's going on in smaller firms."

Maryland is no Nevada, which has been growing at a 6 percent rate. But evidence suggests that it may not be in recession yet, either.

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