Did Government Retirements Distort January’s Economic Data by Softening the Payroll Numbers?

Wintery RoadWhile last Friday’s jobs report for January had good news that unemployment declined from 10 to 9.7%, payrolls declined by 20,000, below consensus estimates that the economy would gain 15,000 jobs. 1  This raises the question of how both unemployment and the number of people with jobs can be going down at the same time.  No doubt a myriad of factors are at play, but it occurred to me that one of them could be a higher than usual number of government retirements last month.

Federal government statistics show that January is usually the most popular month for federal employees to retire, with an annual average of around 8,300 retiring in January between 1992 and 2001. 2  January is likely to be a high volume month again in 2010, as most federal employees eligible to retire were able to maximize the lump sum payment for unused vacation time by retiring on January 1, 2, or 3. 3

Exactly how this trend impacted the data is hard to tell.  The federal government actually gained 24,000 non-census jobs in January,4 though few were likely backfills of workers retiring last month due to the generally slow speed of government hiring procedures.  What’s harder to research is how many other organizations, including state and local governments which continued to trend downwards, have similar quirks in their compensation systems that make January an attractive month to retire and could also have impacted the numbers.

Given the ambiguous nature of this data I would be hard pressed to say it supports any specific conclusions.  But at the very least it’s a reminder of how arbitrary short-term factors that have no relation to the overall economic health of the country can impact the job statistics.

  1. See Timothy R. Homan, Bloomberg, U.S. Economy: Unemployment Unexpectedly Falls to 9.7% (Update3), http://www.bloomberg.com/apps/news?pid=20601068&sid=aMgidOoKS.dI. []
  2. U.S. Office of Personnel Management, Retirement Statistics, p. 4, at http://www.opm.gov/feddata/retire/rs-faqs.pdf. []
  3. See Edward A. Zurndorfer, Best Date to Retire – CSRS and FERS: 2009 and 2010, My Federal Retirement, http://www.myfederalretirement.com/public/315.cfm.  Most federal employees hired before 1984 are covered by the Civil Service Retirement System (CSRS).  See http://www.federaldaily.com/financial/retirementsystems.htm. []
  4. See “Employment Situation Summary,” February 5, 2010, Bureau of Labor Statistics, U.S. Department of Labor, at http://www.bls.gov/news.release/empsit.nr0.htm. []

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