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US missed state’s bright job growth, report finds

Federal revisions of 2011 data faulted

The Massachusetts economy created jobs faster than the nation as whole in 2011, new data show, and the US Labor Department acknowledges that it probably got it wrong when last month it dramatically lowered estimates of the state’s job growth.

The new jobs data are based on reports by most employers in Massachusetts. It restores the picture of the state economy recovering at a steady pace - a picture clouded several weeks ago by revised figures showing minimal job growth in 2011.

An analysis of the data by the University of Massachusetts shows that the state added nearly 40,000 jobs in the first nine months of 2011, far more than the 2,300 the Labor Department reported in revised data for the period.


Ken Robertson, national division chief with the Bureau of Labor Statistics, the statistical arm of Labor Department, said the UMass analysis “is probably right.’’

The new figures reflect an annual job growth rate of about 1.6 percent, compared with 1.4 percent nationally, according to the UMass analysis, indicating that the state has recovered from the recession faster than the nation as a whole.

The UMass findings are published Wednesday in MassBenchmarks, an economics journal.

Officials at the Bureau of Labor Statistics said Tuesday that its lower job estimates were based on a small survey of employers that can have a wide margin of error. Next year, officials said, the bureau will adjust its 2011 estimates again using the same additional data on which UMass based its analysis.

Those data, from a census of all employers in the state’s unemployment insurance system, were unavailable when the bureau issued its revisions in early March. The census lags several months behind survey estimates - but is a more accurate snapshot because it reflects the actual hiring reported by most of the state’s employers.


“We do try to educate people that these numbers are estimates - that they do have error associated with them,’’ Robertson said. “We publicize it on our website and encourage people to take that into consideration when looking at these numbers.’’

The accuracy of the job estimates is important because economists base forecasts on the numbers and many companies use the information to make decisions on spending and hiring.

“These numbers inform people’s perception of what’s going on in the economy,’’ said Michael Goodman,a professor at the University of Massachusetts Dartmouth and coeditor of MassBenchmarks. “Lenders and investors, people who are assessing risk, they all use this data to try to assess the current economic and financial environment. Obviously our knowledge is never perfect, but there is a lot at stake here.’’

Many economists and analysts in Massachusetts were surprised when the Labor Department issued new statistics last month that slashed initial estimates of job growth in the state. Several economists and analysts said the information did not jibe with other economic indicators that showed a steady recovery from the recession in the state.

Alan Clayton-Matthews, a Northeastern University economics professor and author of the analysis published by UMass, said the state had seen a rise in tax revenues, a slowdown in unemployment insurance filings, and rising consumer and business confidence during the year, all positive signs of growth. The unemployment rate dropped nearly a point over the year, to 6.9 from 7.8 percent.

Initial federal estimates showed employers adding nearly 41,000 jobs last year before the downward revision to just over 9,000 jobs.


“The revisions were so extreme, I decided to pay attention to it,’’ Clayton-Matthews said. “And what we do know now is that, taken together, the errors were quite substantial.’’

The revised Labor Department statistics estimated between July and September 2011, employers cut 4,200 jobs; Clayton-Matthews’ analysis of the more comprehensive data found that employers in Massachusetts added 26,100 jobs during the same period.

While Bureau of Labor Statistics officials acknowledged a larger-than-expected sampling error in Massachusetts, officials said that they had no plans to change the way they calculate their reports. But Andre Mayer, senior vice president for research at Associated Industries of Massachusetts, the trade group representing hundreds of state businesses, said substantial revisions and other big swings in the statistics undermine their credibility and pose problems for policy makers.

“Both in Washington and Beacon Hill, we have legislators thinking, ‘What can we do to stimulate jobs?’ And the answer depends on the dynamics of the economy now,’’ Mayer said. “Are we in a situation where there’s no job growth and doing well, or moving ahead and building steam? Its very hard to know what level of intervention you need.’’

Gregory Bialecki, the state’s secretary of Housing and Economic Development, said erratic economic statistics can help fuel a climate of uncertainty that can hinder business growth and cause anxiety for families.

In the long slog out of the recession, more people hang on the numbers in an effort to gauge whether “we’re climbing out of the hole’’ in Massachusetts, he said.


“That uncertainty, to the extent that it’s diminished business and consumer confidence, is important and real and it matters,’’ Bialecki said. “I think [the revisions] did cause people to say, ‘I don’t know what to think.’’

Megan Woolhouse can be reached at