State Job Loss Figures 30% Too High, Labor Dept. Says

In a sign that California may have been far less punished by the recession than previously thought, new federal statistics show that officials overestimated by about 300,000, or well over 30%, the number of jobs lost statewide since the economy turned sour.

Preliminary figures made available Friday from the U.S. Labor Department show that California’s employment was just under 12 million last month, down about 500,000 from the beginning of the U.S. recession in July, 1990. Previous government estimates put California’s job losses at more than 800,000.

“This is a major rewriting of the severity of the recession,” said David Hensley, director of the UCLA Business Forecasting Project.

Although Hensley cautioned that the latest figures still show that California has been in a recession for nearly three years, they could call into question whether the job losses from the current slump are the worst of any downturn since the Great Depression.

The new numbers, based on a nationwide annual audit of employment data, are the latest twist in a long-running controversy over how badly California has been battered by recession.

The revised figures somewhat soften the image of California as a major drag on the national economy, even though its jobless rate remains the highest among the big industrial states. On Friday, the Labor Department reported that California’s unemployment rate rose to 8.7% in May from 8.6% in April. The jobless rate figures were not directly affected by the annual employment audit.

Some state officials questioned the accuracy of the new figures, saying that they give a misleading impression that California is not suffering as seriously as it actually is.

“It just doesn’t jibe,” said H. D. Palmer, assistant director of the state Department of Finance. “It’s not consistent with other economic data for 1990 and 1991.”

Early last year, a state Department of Finance analysis found that federal officials actually were undercounting the jobless in California by hundreds of thousands. For official record-keeping purposes, however, the newly revised figures will be the last word--unless the federal government reworks them.

Nationwide, the federal government’s revised figures showed that 1.3 million jobs were lost in the recession, down from an earlier estimate of 1.7 million. While California has continued to lose jobs in recent months, the U.S. recession is considered to have ended in March, 1991.

Federal officials said they overestimated job losses last year in their annual revision--officially called a “benchmark adjustment”--because they failed to account for changes related to new job-counting techniques. During the 1980s and into 1990, the government’s figures were riddled with double-counting.

For example, in some cases the government erred by tallying paychecks instead of employees. As a result, some workers who received their regular paychecks and bonus checks separately were counted twice.

But when the government switched to new counting procedures in 1991, it did not realize that the previous figures had been inflated by overcounting. Consequently, when the number of jobs counted nationally declined in 1991 and 1992, the government initially assumed that nearly all of the losses were the result of a weakening economy rather than counting errors.

For their part, some California officials say other economic indicators suggest that the state truly has lost around 800,000 jobs over the last three years.

Palmer of the Department of Finance noted that in 1990 and 1991, the state measured a reduction in wages of about $8 billion and a decline of $277 million in personal income tax receipts. “If, in fact, there were 300,000 more people working, then (the wages and tax money) are missing,” he said.

Brad Williams, executive director of the Commission on State Finance, a bipartisan panel that monitors the state’s fiscal condition, agreed with Palmer that “these revisions really don’t make much sense.”

Palmer added that the government’s revision is not likely to affect the ongoing efforts to pass a budget. He said the Department of Finance’s monthly revenue forecasting--which takes job losses into account--has been right on target for many months.

Silverstein reported from Los Angeles and Groves from San Francisco.