Last month I noted that despite local data points and expert opinions pointing to a slowdown in the retail industry, the California Employment Development Department reported that retail industry employment was growing at a fairly healthy pace. To explain this disparity, I offered the hypothesis that the “birth-death model,” a statistical adjustment applied by the EDD in order to model the number of new businesses coming into existence, was overestimating the number of jobs being created by new businesses. (The prior article goes into vastly more detail, for those interested).

Today, the EDD released the January job data as well as revisions to the 2007 numbers. The revised numbers indicate that job growth in the retail sector — and overall, for that matter — was indeed quite a bit lower than the EDD had previously estimated.

You may recall the following chart from the earlier article. It denotes year-over-year retail job growth for each month in 2007 and is reproduced here exactly as it was, the only change being the subtle bright-red letters stating that the chart uses the initial 2007 job numbers provided by the EDD:

Now have a look at the exact same chart using the revised 2007 numbers that came out today:

There are some pretty big differences here. First, it appears that the EDD was underestimating actual retail job growth earlier in 2007. The revised numbers are higher than those initially reported. Near the end of the year, however, the EDD apparently began overestimating retail employment by greater and greater amounts. By December, the initial data showed an annual increase of 2,600 retail jobs whereas the revised December data now shows that the retail industry had lost 1,800 jobs for the year.

Here are two more charts, these indicating year-over-year changes in total nonfarm employment for San Diego:

Here, the initial data overestimated employment growth in the second half of the year by quite a margin. By December, the initial data had shown an annual growth of 14,600 jobs. The new data shows that San Diego added just 300 jobs for the year.

Those are some serious revisions, and job growth has clearly not been anywhere near as strong in recent months as had been previously reported.

January 2008 was looking better, though not by a whole lot. From January 2007 to January 2008, growth outside the housing boom beneficiary sectors was pretty decent at 17,300 jobs or 1.8 percent. But the ghost of the housing bubble still haunts the job market, as the construction industry was down by 6,400 jobs or 7.4 percent, the retail industry by 1,600 jobs or 1.1 percent, and the financial industry (including real estate) by 4,400 jobs or 5.4 percent. In total, San Diego employment was up year-over-year by 4,900 jobs or .4 percent.

These January numbers, it should be clear by now, are estimates.

— RICH TOSCANO

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