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The latest estimates from the California Employment Development Department (EDD) indicated a decline in San Diego employment between December 2009 and January 2010.  But there is always a decline in employment between December and January, and as a matter of fact, this January’s decline was estimated to be substantially smaller than usual.

And that’s where it gets weird.

You see, every March, the EDD (with help from the Bureau of Labor Statistics) revises the prior years’ job numbers based on new and more thorough data.  This time around, they revised 2009 San Diego employment downward by quite a bit.

Let’s take December 2009 as an example.  The EDD’s initial estimate for San Diego non-farm employment in December, initially released in January, was 1,248,400 jobs.  The revised December 2009 estimate released yesterday was 1,218,800 jobs.  The newer estimate was lower by 29,600 jobs or 2.4%.

OK, so, employment is a difficult thing to estimate, and they got new data that gave them a better read on things.  They revised the data accordingly.  So far so good.

The weird part is that the January 2010 data seems strangely positive given the serious downward revision to the data as recent as the prior month.

For example, San Diego employment between December 2009 and January 2010 was estimated to have dropped by 1.4 percent.  But like I said, employment always drops in January.  In the prior five years, the average December-to-January decline was 2.4 percent.  It seems strange that this particular January would have had such an unusually mild decline given the severe downward revisions for 2009.

This same strange dichotomy can also be seen in the accompanying chart of year-over-year job declines.  The annual rate of job loss is cruising along in the range of 70,000 to 80,000 jobs, then suddenly collapses to 50,000 jobs in January.

OK, one more example, this time looking at an individual sector.  Between December 2008 and December 2009, the revised numbers show that employment in the retail sector had dropped by 12,100 jobs.  But between January 2009 and January 2010 (just a month later), the same sector is estimated to have shrunk by only 6,300 jobs.

All this data suggests a very rapid improvement in job conditions in January.  But while it’s possible that the situation could improve that fast, it seems very unlikely that it would do so in a single month after the EDD had just realized that their prior months’ estimates were far too optimistic.

Some combination of factors caused the EDD to make their preliminary estimates too optimistic in late 2009.  Isn’t it possible that the same factors are still in place and causing them to be too optimistic in their preliminary estimate for January?

I actually talked to someone at the EDD about this, and while she said that the January number was calculated before the 2009 revisions were made (which lends credence to the prior paragraph), she didn’t have too much insight to offer on this question.

In short, the preliminary estimates make it look like there was some serious improvement in San Diego job conditions last month.  But the nature of the 2009 revisions throw that conclusion into question, to put it mildly. 

As much as it would be nice to believe that things were improving so fast, I expect that the January numbers will be revised down in the future.  The rate of job loss is probably slowing as it has been since mid-2009, but it seems unlikely that it is slowing anywhere near as much as the latest data suggests.

— RICH TOSCANO

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