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What Does Larry Summers Know About Payrolls?
Aside from the fact that Lawrence Summers, who is Obama’s Economic Advisor was a former Treasury Secretary, what does he really know about last month’s non-farm payrolls report? On the eve of the February NFP release, we wonder loudly how accurate his prediction of a snow-storm related bulge in unemployment really is.
Earlier this month, Summers came out of no where to warn that “The blizzards that affected much of the country during the last month are likely to distort the statistics.” This prompted economists to jump out and say that the snowstorms could inflate job losses by an extra 150,000 to 220,000.
Caroline Baum of Bloomberg did some fantastic investigative research on this and called the Bureau of Labor Statistics directly to find out what Summers really knew (or didn’t). According to her report:
The only people who know the numbers several days before the release work at the Bureau of Labor Statistics, according to Tom Nardone, assistant commissioner for current employment analysis at the BLS.
People in his office, which is responsible for the household survey from which the unemployment rate is derived, and in the office of Pat Getz, his counterpart on the payroll- survey side, compile the report and prepare the databases so everything is set to go at exactly 8:30 a.m. on the first Friday of the month (with an occasional exception).
Who Knows What
The report is provided to the White House Council of Economic Advisers on Thursday, according to Nardone. The Secretary of Labor is briefed at 8 a.m. Friday in a lock-down situation in an office with the BLS commissioner. The same goes for reporters in the press room, where contact with the outside world is suspended under BLS supervision.
“Larry Summers did not have the number when he made his comment,” Nardone said.
The entire process is laid out in the Office of Management and Budget’s Statistical Policy Directive No. 3: “Compilation, Release, and Evaluation of Principal Federal Economic Indicators,” revised on Sept. 25, 1985. The directive also specifies who has access to prerelease information (the president, through the CEA chairman) under strict security arrangements.
Here’s another really great point:
For the household survey, if you have a job and were absent in the reference week, you are counted as employed whether or not you were paid. The survey of establishments is a bit trickier. If you were paid for work you did in any part of the pay period that includes the 12th of the month, whether you worked or not, worked a full or reduced week, you are counted as employed, Nardone says. If you didn’t work that week but got paid, you’re still counted.
Only if you didn’t receive any pay for the entire pay period are you not counted as employed. (The federal government closed its Washington offices for four of five work days, and those folks got paid.)
What categories of workers would be affected? Primarily part-time workers and new hires as counted in the payroll survey.
What this means is that Summers did not have access to the NFP report before hand. His warning was based upon jobless claims and weather reports.