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Size of Possible Revisions

Posted by: Michael Mandel on August 01

The labor market report this morning shows that private sector jobs are down by 418K over the past year. That doesn’t seem so bad. However, history suggests that the revisions downward could be quite large.

Let’s look back at the last recession in 2001. The July 2001 employment report, released August 3, 2001, showed that private employment had risen by 369K over the previous year. According to the latest revision, the actual change in private jobs from July 2000 to July 2001 was a decline of 398K jobs—almost an 800K swing.


I’m not saying that the same thing will happen again…but the job numbers have a real tendency to be overstated when recessions are starting.

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Reader Comments


August 1, 2008 03:10 PM

I agree with the above data. I am a living example of the unemployment situation and the downturn in the economy. I have been in and out of steady employment for five years. The economy is worse than ever and I don't see that is going to change anytime soon.


August 1, 2008 03:55 PM

Good Observation. John Mauldin ( ) also pointed this out in one of his weekly articles.


August 1, 2008 08:48 PM

These days all govt statistics are lies. Why should the employment statistics be an exception?


August 3, 2008 02:25 AM

A bit scary. A time series would be intersting.


August 4, 2008 02:08 PM

While I agree that revisions over the subsequent 2 years are dramatically different from initial reporting, this goes in both directions. The 2000-01 downward revision was met by an upward revision of 800,000 jobs for 2004-05.

In this recession, I don't think job losses will be as severe, simply because too few were created during the expansion.

The 2000 peak was so high, that even at the 2007 peak, the number of jobs was only 5 million more than the 2000 peak. Thus, the 2008-09 job losses will also not be that many.

The unemployment rate is 5.7%. I doubt it will get higher than 6.3%. So most of the worsening is over.


August 8, 2008 06:20 PM

This question is a bit off topic, but is a rising US dollar combined with falling commodity prices a possible indication of a rise in deflationary pressures?

Joe Cushing

August 12, 2008 02:49 AM


I'd call it a softening of inflation. I know there are some, including Mike, who think there is a deflation issue but I don't. I think economic cycles put into place temporary inflation/deflation as the multiplier effect that banks have on money supply changes. The fed has a much more sustainable effect and I believe that effect to be inflationary in recent history. Right now we have cyclical deflationary pressure in a monetary inflationary period. I think this means inflation is worse than it appears with our measuring tools.

You can think of the exchange rate as dollar inflation outside the U.S. Since dollar inflation inside the U.S. hasn't happened as fast as outside the U.S. the dollar is weak. When we repatriate dollars through; increased exports, increased foreign investment, and decreased exports; we will repatriate inflation with those dollars.

We don't have to have the exchange rates change completely back to have a strong dollar. We only need to have inflation at home to increase the number of dollars we all earn and the number of dollars it takes to buy American goods and assets. This inflation would also reduce the number of hours an American would have to work to buy a foreign good or service for a given exchange rate.

In other words the strength of a currency is measured by the difference between inflation/deflation inside that currency's country to inflation/deflation outside that currency's country--compared also to it's exchange rate. It is not measured by exchange rate alone. This is how a yen can be pretty strong when it takes less than a penny to buy one.

The dollar is NOT 100 times a strong as the yen because it takes more than 100 yen to buy a dollars worth of goods in Japan. If it only took 50 yen to buy a dollars worth of goods in Japan the yen would be very strong indeed--at the current exchage rate of 109 yen to the dollar.

What do you think of this theory Michael?

Ron Mepwith

September 7, 2008 10:03 PM

Kartik, did you look at the lates figure of 6.1%? And we are just at the beginning of this downturn. Much worse lies ahead. I suggest that we will see 12% unemployment before the cycle turns up.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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