Business Employment Dynamics

Overview

Business Employment Dynamics consist of a quarterly series of statistics on gross job gains and gross job losses. Gross job gains and gross job losses reveal some aspects of business dynamics, including establishment openings and closings and establishment expansions and contractions.

Purpose

Business Employment Dynamics data are quarterly series of gross job gains and gross job losses statistics for the entire economy. These data track changes in employment at the establishment level, and thus provide a picture of the dynamics underlying aggregate net employment growth statistics.

Sources

The microdata used to construct the gross job gains and gross job losses statistics are from the Quarterly Census of Employment and Wages (QCEW), or ES-202, program. These data include all establishments subject to State unemployment insurance (UI) laws and Federal agencies subject to the Unemployment Compensation for Federal Employees program. Each quarter, the State agencies edit and process the data and send the information to BLS in Washington, DC. The data cover approximately 98 percent of all employment; the major exclusions from UI coverage are the self-employed and certain nonprofit organizations. Establishments report employment for the pay period including the 12th of the month. The job flow estimates report employment changes between the third month of each quarter.

Data Available

The first release of data covers the period from 1992 through 2002 with subsequent quarterly updates. Data are reported with and without seasonal adjustment.

Forms of Publication

The quarterly data series include the number and percent of gross jobs gained by opening and expanding establishments, and the number and percent of gross jobs lost by closing and contracting establishments. The data also include the number and percent of establishments that are classified as openings, closings, expansions and contractions.

Uses

As the quarterly time series grow longer, their value in assessing the business cycle, the level of labor market volatility, and the effect of establishment employment changes on aggregate employment will increase. These data will be particularly useful in highlighting the forces behind the net changes in employment. For instance, a large decrease in employment stemming mostly from a decrease in gross job gains will have far different business cycle implications than a decrease due mostly to an increase in gross job losses. In addition, these data will highlight the importance of job changes at opening and closing establishments relative to changes at existing establishments.

These data can help economists, policy-makers, and the business community develop a more complete understanding of the dynamics of employment over the business cycle. Specifically, it will enable researchers to examine the relationship between the pace of gross job gains and gross job losses and the net employment changes observed over the business cycle.

Seasonal Adjustment

Over the course of a year, the levels of employment and the associated job flows undergo sharp fluctuations due to such seasonal events as changes in the weather, reduced or expanded production, harvests, major holidays, and the opening and closing of schools. The effect of such seasonal variation can be very large.

Because these seasonal events follow a more or less regular pattern each year, their influence can be eliminated by adjusting these statistics from quarter to quarter. These adjustments make nonseasonal developments, such as declines in economic activity, easier to spot. For example, the large number of youth entering the labor force is likely to obscure any other changes that have taken place in June relative to March, making it difficult to determine if the level of economic activity has risen or declined. However, because the effect of students finishing school in previous years is known, the statistics for the current year can be adjusted to allow for a comparable change. The adjusted figure provides a more useful tool with which to analyze changes in economic activity.

The seasonally adjusted series for employment and establishments at opening, expanding, closing, and contracting establishments are independently adjusted and the net changes are calculated based on the difference between gross job gains and gross job losses. Seasonal adjustment is run concurrently using X-12 ARIMA.

Concepts and Methodology

Business Employment Dynamics measure the net change in employment at the establishment level. These changes come about in one of four ways. A net increase in employment can come from either opening establishments or expanding establishments. A net decrease in employment can come from either closing establishments or contracting establishments. Gross job gains include the sum of all jobs added at either opening or expanding establishments. Gross job losses include the sum of all jobs lost in either closing or contracting establishments. The net change in employment is the difference between gross job gains and gross job losses.

The formal definitions of establishment-level employment changes are as follows:

Openings. These are either establishments with positive third month employment for the first time in the current quarter, with no links to the prior quarter, or with positive third month employment in the current quarter following zero employment in the previous quarter.

Expansions. These are establishments with positive employment in the third month in both the previous and current quarters, with a net increase in employment over this period.

Closings. These are either establishments with positive third month employment in the previous quarter, with no positive employment reported in the current quarter, or with positive third month employment in the previous quarter followed by zero employment in the current quarter.

Contractions. These are establishments with positive employment in the third month in both the previous and current quarters, with a net decrease in employment over this period.

All establishment-level employment changes are measured from the third month of each quarter. Not all establishments change their employment levels; these establishments are included in total employment, but do not affect counts of gross job gains and gross job losses.

Job flows are expressed as rates by dividing their levels by the average of employment in the current and previous quarters. This provides a symmetric growth rate. Job flows are calculated for the components of gross job gains and gross job losses and summed to form their respective totals. Job flow rates can be added and subtracted just as their levels can. For instance the difference between the gross job gains rate and the gross job loss rate is the net growth rate.

The linkage process matches establishments' unique State Employment Security Agency identification numbers (SESA-ID). Between 95 to 97 percent of establishments identified as continuous from quarter to quarter are matched by SESA-ID. The rest are linked in one of two ways. The first method uses predecessor and successor information, identified by the States, which relates records with different SESA-IDs across quarters. Predecessor and successor relations can come about for a variety of reasons, including a change in ownership, a firm restructuring, or a UI account restructuring. If a match cannot be attained in this manner, a probability-based match is used. This match attempts to identify two establishments with different SESA-IDs as continuous. The match is based upon comparisons such as the same name, address, and phone number. Finally, an analyst examines unmatched records individually and forces a match, if possible.

Last Modified Date: January 6, 2004

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