Jobs: The Truth Might Hurt

The economy may be slowing, but at least employment is still rising, right? That's what the latest numbers from the Bureau of Labor Statistics tell us. But the bureau is in the process of changing the way it estimates its monthly numbers--and jobs have fallen since November in the sector where the new method is now being used.

In June, 2000, the bureau applied its new technique for estimating jobs to the wholesale trade sector, comprising companies that supply such enterprises as retailers, construction contractors, hospitals, and farms. That technique, called probability sampling, provides better estimates, because the employer sample is chosen at random, which helps ensure a true representation of existing companies. The approach is also designed to more easily accommodate changes in the sample size when new businesses are created: It's "the recognized standard--more scientifically based," says Patricia M. Getz, division chief for the bureau's Current Employment Statistics. The old method, called quota sampling, doesn't choose the companies at random but simply cuts off the sample when responses meet the quota. Jobs-data collectors are scheduled to phase out the quota approach by June, 2003, she says.

If the sampling method used in wholesale trade is more accurate, as Getz argues, then the jobs trend there is a bit unsettling. Total nonfarm employment is estimated to have grown steadily since September, 2000--with jobs up by 395,000 between November, 2000, and February, 2001, for example. Yet wholesale jobs have fallen every month since November, 2000 (chart).

Does the drop in wholesale employment mean that the economy has actually been losing jobs overall? The wholesale industry is in part related to manufacturing, and the numbers there--unlike the still-expanding service sector--are falling even with quota sampling. "It makes sense that it's related to the slowdown in manufacturing," Getz says of the fall in wholesale jobs. But a large part of the industry provides goods to the service sector. It may well be that a more accurate reading of service jobs would show that it, too, is beginning to decline. Big-league sports continue to strike out with economists. First there was a rash of studies that found stadiums and professional teams have little, if any, positive economic impact on a community. Then researchers concluded that even the intangible benefits, such as civic pride, aren't enough to justify public subsidies. Now an article in the Southern Economic Journal finds that local economies don't suffer when their hometown team stops playing because of a strike or lockout.

The new research, by Dennis C. Coates and Brad R. Humphreys of the University of Maryland Baltimore County, looks at 37 cities that had a pro baseball, football, or basketball team at any time between 1969 and 1996. Their goal: to see if a city's per capita personal income was at all harmed by a work stoppage in baseball or football, or by the loss of a basketball franchise.

Coates and Humphreys conclude that strikes and lockouts in professional baseball and football had no measurable impact on an area's per capita income. Neither does the departure of a pro basketball franchise.

The report doesn't surprise Coates, who emphasizes that sports franchises make only a tiny contribution to community employment. In fact, he and Humphreys have just completed additional research that finds teams don't add much to total employment even when one looks closely at the sectors of amusements, recreation, restaurants and lodging, where employment is most likely to be affected by pro franchises.

The results provide further evidence that pro sports make no sense as a cornerstone for regional economic development. Communities that spend dollars to lure or keep teams are wasting taxpayer money, the authors argue. But the public doesn't seem to care. Voters in Houston and Phoenix, for example, recently passed referendums to subsidize new stadiums. Despite a collapse in consumer confidence and the "unwealth effect" of falling stock prices, consumers are still spending. In fact, February retail sales are up 2.7% from the same month last year. And many households are getting some help from an unlikely source--the Internal Revenue Service.

According to a research report by William V. Sullivan Jr., senior economist at Morgan Stanley, the IRS sent out a record $38.9 billion in refunds in February. That's $2.3 billion more than in the same month last year, he notes. One big reason: More taxpayers are completing their taxes returns early by taking advantage of electronic filing.

But early filing isn't the only reason for the refund boom. Many people seemed to have boosted their tax withholding last year, expecting large stock market gains, says Mark M. Zandi, chief economist at But when those gains failed to materialize, they found they had withheld too much, resulting in the large refunds. Total refunds for the full February-to-May tax season "could range between $145 and $150 billion," says Sullivan. Even his low estimate would top last year's refunds by about $10 billion.

With the economy slowing, such a large injection of cash couldn't be better timed. Most households spend their refunds on items such as clothes, cars, and furniture. And the unspent portion often goes to paying off debt, clearly a good thing considering consumer loans are at an all-time high.

The Good Business Issue
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