The various government agencies tasked with estimating and calculating economic parameters and accounts perform regular benchmark revisions. The scale of revisions depend on many factors, not the least of which is the NBER’s “official” determination of the exact place in the “cycle” the economy exists in any discrete period of time. However, these accounts and estimations also are subjected to changes in official definitions, the most recent and notable being the BEA’s decision to include R&D and intangibles in GDP.
Typically in the case of such major definition revisions, the agency making the change also goes back and re-estimates the historical record to include past results under the new paradigm. The reason is obvious – to ensure there is an apples to apples comparison across the chronological series. If the BEA, for example, simply decided to change the GDP definition only for the second quarter of this year and forward, GDP would have grown tremendously over the first quarter, not at all representative of the underlying state of the economy.
It is very interesting, then, that last week’s BLS benchmark revision included a definition change without historical revisions. As part of the normal benchmark review process, the BLS makes changes based on reconciling state unemployment insurance tax filings with its estimates of overall employment (while still subjecting them to other statistical adjustments). This year the BLS decided to include household workers (“employment in Private households” in official terms) in the benchmark revisions, placing them in the “education and health care services industry.”
These household workers are, essentially, nannies and babysitters, the guy who mows your lawn occasionally, chauffeurs, etc. We have no idea how or whether these jobs fit into typical employment classifications, which is why they were outside the definition prior to last week’s benchmark revision.
So the March 2013 benchmark was raised to include 469,000 nannies and babysitters, with no adjustment as to how many there might have been in the prior record. The employment benchmark revision now shows 333k net private sector job gains above previous estimates. Absent all these newfound nannies, the benchmark revisions would have been -124k, or -136k in private industry alone; it was a downward revision absent the definition change. It is also noteworthy that nearly all of that downward adjustment was limited to “trade, transportation and utilities”, a broad sector view that has been responsible for most of the employment gains in the past few years.
Maybe I am being too critical, after all the economic results in the activist central banking age have suggested, and highly so, a bifurcated economy where those most connected to central banking facilities are doing extremely well, while those outside that narrow circle more than struggle. Perhaps the inclusion of so many nannies is just a reflection of that economic distortion, as the work force is reshaped by monetary policy to one where jobs grow marginally almost exclusively as a result of this artificial enrichment.
That might be a bit of a stretch in terms of what the BLS is willing to admit as reasoning for the inclusion, but for economic accounts it is still an artificial distortion. That is particularly true since it will appear in the employment data as if the nanny profession, contra Mary Poppins, was first discovered in March 2012.
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