May 21, 2009

The Texas Workforce Commission (TWC) recently published fourth quarter 2008 Covered Employment and Wages data (CEW) along with updates to the second and third quarters. The more comprehensive CEW data are the basis for benchmarking the payroll employment data. TWC releases rebenchmarked payroll figures once per year; the next update is scheduled for March 2010. For several years the Dallas Fed has estimated more up-to-date payroll employment figures by incorporating CEW data as they are released quarterly by TWC.

Benchmark Results
With the inclusion of the new CEW information, fourth quarter 2008 FRB-adjusted Texas payroll employment growth was revised down from an annual rate of 1 percent to 0.3 percent.  The third quarter figure was revised up from –1.2 percent to –0.8 percent, largely because of changes in local government employment in the CEW data. With changing school calendars, it can be difficult to seasonally adjust local government employment accurately. When we see volatility in local government employment, it can be useful to focus on private employment. Although total employment growth returned to positive territory in the fourth quarter, private employment growth actually worsened a bit, from –0.8 percent in the third quarter to –1 percent in the fourth.

The FRB-Dallas benchmarking program produced an average upward revision of 1.1 percentage points over the 14 quarters from third quarter 2004 through fourth quarter 2007. Since then, we have seen four consecutive downward revisions, ranging from –0.7 to –2.2 percentage points.

Chart 1 illustrates that the principal difference between the Dallas Fed estimate of payroll employment and that of TWC is our lower estimate of growth in the fourth quarter of 2008.

Chart 1

The FRB Dallas estimate of total Texas payroll employment growth for 2008 is 0.6 percent. The corresponding TWC figure is 0.9 percent, which has not yet incorporated the latest CEW data. Although revisions to third and fourth quarter 2008 CEW data could change the outcome, it appears that Texas will be the only large state to achieve positive payroll employment growth in 2008.

Recent Employment Performance
Initial estimates indicate Texas payroll employment declined at an annual rate of 4.4 percent during the first quarter of 2009. The corresponding figure for U.S. employment growth over the same period is –5.8 percent. The sheer magnitude of the Texas decline, together with recent methodological changes in TWC’s calculations (see www.bls.gov/sae/cesprocs.htm), makes it impossible to speculate about the likely direction of future revisions to first quarter 2009 data. When first quarter 2009 CEW data are published—probably in late August— we will have a better sense of recent Texas employment performance.

—Franklin D. Berger