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The Labor Department released in March revised employment figures for Greater Cleveland metro area. The good news? the Cleveland-Elyria-Mentor metro area gained more jobs than initially reported. The bad new? Greater Cleveland finished next to last in job growth nationally among large metro areas.

(Associated Press photo)

CLEVELAND, Ohio -- The reaction was becoming so common that it threatened to become a ritual. The Labor Department would release employment data about metro areas. Then business leaders, policymakers and others concerned about job growth in Greater Cleveland would cringe.

Beginning last spring, and continuing for much of the year, the monthly reports gave two distressing details about the local labor market: Greater Cleveland was losing more jobs than any large metro area in the country, and it was in last place for job growth.

An annual revision, released in March, showed that the Cleveland-Elyria-Mentor metro area was still struggling, but it wasn't as down on its luck as the Labor Department had initially reported. Instead of losing employment, the metro area was gaining. The Cleveland-Elyria-Mentor metro includes Cuyahoga, Medina, Lake, Geauga, and Lorain counties.

However, that increase wasn't enough to change its standing among the 38 large metros. Instead of being last for job growth, Greater Cleveland finished next to last.

Last place now went to Pittsburgh. The revisions showed the initial figures had overestimated job growth there, causing the metro to plummet to the bottom from 22nd place.

Releasing initial figures and then issuing revised reports several months later is standard for the metro area numbers and much of the data the Labor Department releases. It isn't uncommon for more than one revision to be done as more reliable data becomes available. Still, the difference in numbers has outraged many in the business community because they said the early numbers showing the Cleveland Greater Cleveland losing jobs was potentially damaging.

"When people hear that kind of thing they say, 'Well, we're going backwards,'" said Thomas Waltermire, CEO of Team NEO, whose mission includes spurring business growth in Northeast Ohio. "When the headlines say we're on a losing streak, it tells people that you're losers."

Joel Elvery, an economist at the Federal Reserve Bank of Cleveland, compared initial monthly figures to their revisions for September 2012 to September 2013. He found that since May, the early numbers showed Greater Cleveland losing jobs when the metro area had actually gained them. For example, the Labor Department initially reported Greater Cleveland had lost 7,200 jobs between September 2012 and September 2013. The revision showed the area actually had gained 7,400 jobs.

Waltermire said being in the plus column is good for the area's psyche, as well as good for business.

"People take on investments and take risks when they are confident," he said. "When the chatter around them is one that says that things are going in reverse, people are less confident. They are less willing to take on risk, and it ultimately shows up in growth."

Because the reports of job loss hadn't gone on for a year or more, it is difficult to measure its impact on such decisions, Waltermire said. He said the monthly reports of job loss were a downer, and that it is unrealistic to assume they weren't causing business leaders and others to raise negative thoughts about the region's future. That is why Team NEO, joined by other supporters, is spreading the good news about the revisions to policymakers, business and civic groups and others concerned about the region's economy.

"Economics is a combination of hard numbers and psychology," Waltermire said. "When the psychology is not good, it can have an effect."

George Zeller of Cleveland, an economic research analyst, disagreed.

"What causes us to grow is not psychology," he said. "It is job growth."

Zeller said he was glad to see the revisions showed the area gaining and not losing jobs. However, he said such a gain wasn't thrilling because it only cemented the current trend: Greater Cleveland was recovering from the Great Recession, but ever so slowly. So was Northeast Ohio. He said of 16 counties, only Carroll County had recovered jobs lost during the recession, primarily because hydraulic fracturing is forging an emerging energy industry. Zeller emphasized that even after the revisions, Greater Cleveland was still near the bottom of the list.

"The current metro Cleveland figures are that metro Cleveland gained 8,519 jobs during the past year, a very good thing," he wrote in an email. "But, metro Cleveland still has 58,266 fewer jobs than it had in 2007, a 5.6 percent loss."

What is causing the gap between initial and revised figures?

No one seems to know for sure why there is a gap, but most believe it has to do with the sample size. The early figures about whether metro areas gained or lost jobs is based on a national sample survey of employment at businesses and government agencies. In Ohio, the sample covers about 20,000 of approximately 273,000 establishments.

The revised figures aren't from estimates, but the count of jobs -- covering 98 percent of employment -- based on taxes employers pay for workers covered under the unemployment insurance system.

Edward "Ned" Hill, dean of the Levin College of Urban Affairs at Cleveland State University, said he believes the sample size should be larger. Like Team NEO, he said the early reports of job loss were damaging, and has joined the group in getting the word out about the revisions.

"The sample size is very small," he said. "It is designed to be accurate for the nation, so a sampling error that would affect a metro, wouldn't affect the national numbers."

Ohio isn't the only place where concerns about initial figures missing the mark have been raised. In the past few years, concerns have been expressed in Maine, Massachusetts and Wisconsin.

Hill said the recovery might have added to the gap between initial and revised numbers because the mix of employers in the sample may not reflect what is going on in the local economy. Though the sample is selected each year, businesses are kept in the sample for a minimum of two years.

"When the economy is going through a turning point, it can take a couple of years for the sample to reflect the new shape of the economy," he said.

A few years ago, the Labor Department centralized the way it does the surveys. Hill said this means agencies such as the Ohio Department of Job and Family Services Bureau of Labor Market Information don't get to do as much local quality control on the data.

Coretta Pettway, chief of Ohio's LMI bureau, said it is unfair to generalize about whether centralization was leading to larger gaps between initial and revised numbers. Part of the reason the Labor Department's Bureau of Labor Statistics, or BLS, made the change was because the previous system also had problems, she said.

"The BLS decision to centralize was because the previous method allowed for more analytical judgment by state analysts, which did not catch the rapid turning point of the 2007 recession," she wrote in an email.

Pettway said more needs to be done to reflect the local economy.

"There are local events -- such as strikes, layoffs, grand openings, etc. -- that may impact employment, and are not captured by the sampling frame, (or collection of data from a sample)," she wrote.

She agreed with Hill that the sample needs to be larger.

"The closer the sample is to the universe (of actual employers), the smaller the gap between the initial and revised figures," Pettway wrote.

A larger sample would require more funding; something many say is unlikely in an era of federal budget cuts.

Is the gap really that big?

Elvery, the Cleveland Fed economist, said even though the initial figures didn't show Greater Cleveland as posting job loses until April, the problem of the numbers gap began earlier.

"In early 2012, when they underestimated our growth, it still looked like we were growing because we had enough growth that the underestimate looked like we were still growing," he said.

Elvery looked at year-over-year changes in employment in the Greater Cleveland metro area, from September 2012 to September 2013. With the exception of the period covering February 2012 to February 2013, the initial figures underestimated job growth for the metro. The largest revision was 21,000 for August 2012 through August 2013.

None of the revisions was significant by BLS standards. Any revision showing employment changes of plus or minus 21,300 is acceptable for the Greater Cleveland metro.

"For the Cleveland-Elyria-Mentor metro area, the sample size of the CES (Current Employment Statistics) survey is sufficient to identify an over-the-year change as significant (at the 90 percent confidence level) when the employment change is greater than +/- 21,300," Ken Robertson, assistant commissioner for Industry Employment Statistics at the BLS in Washington, D.C. wrote in an email.

So the revisions didn't make Cleveland an outlier in any way among large metros Robertson said.

"It is within the range of revisions that other metropolitan areas of similar size have for the survey," he said.

But Elvery believes the initial figures are too far off target, not just in Greater Cleveland, but in other metros as well. Cleveland did not have the largest gap between initial and revised numbers in Ohio. For example, initial figures had Greater Cleveland losing 0.7 percent of employment between September 2012 and September 2013 when job growth was actually 0.7 percent.

Initial figures had job growth in Columbus at 1.4 percent, when it was actually 2.7 percent. The revision moved Columbus from 26th to 18th for job growth among large metros nationally. Initial figures had job growth in Greater Cincinnati at 0.7 percent, but it was revised to 1.8 percent. The metro moved from 35th to 25th place.

Elvery and Christopher Vecchio, a research analyst at the Cleveland Fed, did a paper showing that sizable revisions weren't uncommon in the Fed's region, which includes Kentucky, Pennsylvania and West Virginia.

"From 2006 to 2012, four of the six metro areas we studied had at least one month with revisions that added or subtracted more than 2 percent of employment, which is enough to wipe out the typical average year-over-year change in jobs for those metro areas," they wrote.

Because of this trend, and the power of the early numbers to skew people's perceptions about a metro's job growth, Jenny Febbo, Team NEO's vice president for marketing and communications, wants BLS to either stop releasing initial data or better still, find a way to release the revised data more quickly. It usually takes seven months after the end of a quarter for revisions to be release.

Jacob Duritsky, Team NEO's managing director for research, said at the very least, BLS should reconsider how it releases the initial data.

"In releasing the preliminary numbers, BLS should realize that there is so much volatility in those numbers," he said. "But then they send out a press release touting winners and losers, when they themselves are saying that the numbers are subject to revision."

Nick Gattozzi, vice president for government advocacy at Greater Cleveland Partnership, said his organization is working with the Ohio delegation on Capitol Hill to see what can be done to close the gap between initial and revised figures.

Hill, the CSU dean, said their concerns about the gap don't mean they have anything against BLS.

"BLS is clearly a very good organization, but it is suffering from budget cutbacks, and trying to satisfy local demand for very quick numbers on the performance of their economies," he said.

Waltermire of Team NEO, agreed, but it doesn't make him any less perturbed.

"Why is that the right way to operate?" he questioned.