Wednesday, May 30, 2012

In Wisconsin’s Jobs Debate, Walker Has the Stronger Case

In Wisconsin’s Jobs Debate, Walker Has the Stronger Case

Ticker: Wisconsin Jobs
Has Wisconsin gained jobs since Governor Scott Walker was elected?
According to the Bureau of Labor Statistics, Wisconsin has lost about 21,400 non-farm jobs between April 2011 and April 2012, making the state the worst job-growth performer in the nation. The Wisconsin Department of Workforce Development figures tell a different story.  Their most recent figures show that Wisconsin  added 23,321 jobs between December 2010 and December 2011, while comparable not-seasonally adjusted BLS figures show that Wisconsin lost 33,900 jobs over that time period.

About Edward Glaeser

Edward Glaeser, a professor of economics at Harvard, is the author of "Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier."
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This discrepancy should remind us that all economic data are imperfect, but my best guess, based on alternative data, is that Wisconsin is doing far better than the awful BLS figures suggest.
These numbers have been given too much importance because Walker did a foolish thing when he was first running for office: He promised to deliver more than 250,000 jobs. But Wisconsin’s governor actually has relatively little power to control job creation, which is generally determined by economic forces far beyond his control.
Over the decades, we have seen economic headwinds buffet capable leaders, and boobs benefit from economic booms. Yet voters often give leaders far too much credit or blame for their state’s economy. Economist Justin Wolfers, a fellow Bloomberg View columnist, has found that voters are more likely to re-elect governors from oil patch states when rising oil prices cause their local economies to boom, despite the fact that no governor of Oklahoma can determine world-wide petroleum prices.
But given Walker’s election promise, we should at least try to determine whether Wisconsin’s economy is getting stronger or not.
The competing figures from the BLS and the Wisconsin state numbers both come from employer surveys and are not seasonally corrected. The Wisconsin figures come from a larger sample, which is typically a good thing, although voters can be forgiven for being suspicious, since those numbers have not yet been vetted by anyone outside of state government. Moreover, the BLS publishes guidelines for expected errors in state employment growth, and the discrepancy between the two sources is far beyond the statistical norm.
One way to judge between the numbers is to look at alternative data sources and see whether they tend towards gloom or growth. The BLS itself provides an alternative estimate of job growth from its household survey, which is generally less accurate than the employer survey and suggests strong job growth between 2011 and 2012.  According to the household survey, Wisconsin’s unemployment rate has dropped significantly over the last year, and employment has increased by 22,000 between March 2011 and 2012, again not seasonally adjusted, which is closer to the figure Walker is promoting than the BLS’s own establishment survey.
The BLS Mass Layoff database also shows that between the first four months of 2011 and the first four months of 2012 the number of mass layoffs dropped by about 30 percent and the number of new unemployment insurance claims from those layoffs fell by 36 percent. Wisconsin’s total personal income grew by 4.5 percent nominally, or about 1 percent in real terms, between the fourth quarter of 2010 and the fourth quarter of 2011. Wisconsin’s rental vacancy rate was down to 6.6 percent in 2011, down from 8.6 percent in 2010.
My best guess is that the truth lies between the two figures, but closer to the upbeat Wisconsin state numbers than the BLS estimate. But voters shouldn’t be basing their decisions on recent job growth, which owes far more to individual entrepreneurs and chance than to anything the governor has done. They should be making their choices based on the things the governor does control, not on short term economic data, which are neither perfectly measured nor under the governor’s control.

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