Economic News Release

New Quarterly Data From BLS on Business Employment Dynamics By Size of Firm Summary


Technical information:  (202) 691-6467     USDL 05-2277
               http://www.bls.gov/bdm/
                                           For release:  10:00 A.M. EST
Media contact:                691-5902     Thursday, December 8, 2005


            NEW QUARTERLY DATA FROM BLS ON BUSINESS EMPLOYMENT
                         DYNAMICS BY SIZE OF FIRM
     
   New data on Business Employment Dynamics (BED) by firm size were 
introduced today by the Bureau of Labor Statistics of the U.S. Depart-
ment of Labor.  These data show how large firms, small firms, or both
are creating or losing jobs in the economy.  These new data detail nine
different size classes in the private sector spanning September 1992 to
March 2005, and include measures of gross job gains, gross job losses, and
net employment change.  They can be used to examine employment trends for
different firm-size classes on a relatively current basis or for selected
time periods of particular interest, such as over-the-year changes or for
different points in the business cycle.  This release presents a brief a-
nalysis of the data over the full time series, during the 2001 recession,
and for the first quarter of 2005, the most recently available quarter.
For example, the data show that, from September 1992 through March 2005,
firms with fewer than 500 employees accounted, on average, for 65 percent
of quarterly net employment growth, representing 13.5 million out of 20.6
million net jobs created by the total private sector.  (See tables A and D.)
As of March 2005, firms with fewer than 500 employees accounted for 55.8 per-
cent of private sector employment.  (See table B.)

What are Business Employment Dynamics?

   The change in the number of jobs over time is the net result of
increases and decreases in employment that occur at all firms in the
economy.  These new data track the changes in employment at private
business firms from one quarter to the next and allocate the gain or
loss in employment into the appropriate firm-size class.  Gross job
gains are the sum of increases in employment from expansions in employ-
ment at existing firms and the addition of new jobs at opening firms.
Gross job losses are the result of contractions in employment at existing
firms and the loss of jobs at closing firms.  The difference between the
number of gross jobs gained and the number of gross jobs lost is the net
change in employment.  Thus, the BED statistics show the labor market
flows that underlie the net employment change.  The BED statistics for
this release are measured at the firm level rather than the establish-
ment level, and are not comparable to other BED data series.  (See the
Technical Note for a more complete discussion of these data.)

                                  - 2 -

Table A.  Net change in employment, third quarter 1992-first quarter 2005,  
seasonally adjusted

(In thousands)                                                                        
-------------------------------------------------------------------------------
           |               Size class (number of employees)                                                                 
           | ------------------------------------------------------------------
  Category | Total|     |     |     |      |      | 100  |  250 |  500 | 1,000
           |  pri-| 1-4 | 5-9 |10-19| 20-49| 50-99|  -   |   -  |   -  |   or
           |  vate|     |     |     |      |      | 249  |  499 |  999 |  more
-------------------------------------------------------------------------------
Net change |      |     |     |     |      |      |      |      |      |
  in em-   |      |     |     |     |      |      |      |      |      |      
  ployment.|20,597|2,014|1,379|1,705| 2,529| 1,924| 2,411| 1,502| 1,213| 5,920
-------------------------------------------------------------------------------
Cumulative.|  -   |2,014|3,393|5,098| 7,627| 9,551|11,962|13,464|14,677|20,597
-------------------------------------------------------------------------------

Size Distribution of Firms
   
   At the end of the first quarter of 2005, there were 4.9 million firms
in the private sector of the U.S. economy.  Firms with fewer than 500
employees accounted for 99.6 percent of all firms and 55.8 percent of
total employment.  Of the firms included in the BED data, 54.4 percent
had 1-4 employees, representing 5.2 percent of total employment.  In con-
trast, firms with 1,000 or more employees accounted for 0.2 percent of
firms and had 37.4 percent of total employment.  (See table B.)
   
Table B.  Number of firms and employment by size class, first quarter 2005,
not seasonally adjusted
------------------------------------------------------------------------------
                    |       Number of firms       |        Employment
                    |---------------------------------------------------------
                    | Number| Cumu- |Share |Cumu- |Number | Cumu- |Share|Cumu-
  Firm size class   |   of  |  la-  | of   | la-  |of em- |  la-  | of  | la-      
                    | firms | tive  |total |tive  | ploy- | tive  |total|tive
                    |       | share |      |share |  ees  | total |     |share
                    |---------------------------------------------------------
                    | In thousands  |   Percent   | In thousands  |  Percent
------------------------------------------------------------------------------
1-4 employees.......| 2,687 | 2,687 | 54.4 | 54.4 | 5,606 |  5,606|  5.2|  5.2
5-9 employees.......| 1,006 | 3,693 | 20.3 | 74.7 | 6,613 | 12,219|  6.1| 11.3
10-19 employees.....|   610 | 4,303 | 12.4 | 87.1 | 8,204 | 20,423|  7.6| 18.9
20-49 employees.....|   392 | 4,695 |  7.9 | 95.0 |11,801 | 32,223| 10.9| 29.9
50-99 employees.....|   129 | 4,824 |  2.6 | 97.6 | 8,873 | 41,096|  8.2| 38.1
100-249 employees...|    75 | 4,899 |  1.5 | 99.1 |11,310 | 52,406| 10.5| 48.6
250-499 employees...|    23 | 4,922 |   .5 | 99.6 | 7,813 | 60,219|  7.2| 55.8
500-999 employees...|    11 | 4,932 |   .2 | 99.8 | 7,334 | 67,553|  6.8| 62.6
1,000 or more       |       |       |      |      |       |       |     |
  employees.........|    10 | 4,942 |   .2 |100.0 |40,349 |107,902| 37.4|100.0
------------------------------------------------------------------------------

Average Gross Job Gains and Losses by Firm-Size Class:  September 1992-
March 2005
   
   The data in this release show the dynamics within nine size classes.
For example, from the third quarter of 1992 through the first quarter of
2005, the average quarterly gross job gains in the largest firms--those
with 1,000 or more employees--were 1.2 million, and the average quarterly
job losses were 1.1 million.  This resulted in an average net quarterly
gain of 117,000 jobs, or 28.8 percent of the average total net quarterly
change.  Firms with 1,000 or more employees had the largest average net
quarterly gain among the nine firm-size categories used in this release.
Firms with 20-49 employees had net quarterly gains of 50,000 jobs on av-
erage, or 12.3 percent of the total net change in employment--the second
largest average quarterly gain.  (See tables C and D.)

                                  - 3 -

   The firm-size classes presented in this release can be combined to
create other groupings for analysis.  For example, a commonly used def-
inition of a "large" firm is 500 or more employees; data for this
grouping can be created by combining two firm-size classes, those with
500-999 employees and those with 1,000 or more employees.  Firms with
500 or more employees were, on average over the period, responsible
for 23.3 percent of all gross quarterly job gains, 22.5 percent of
gross quarterly job losses, and 35.0 percent of quarterly net gains
in employment.  (See table D.)

   Generally, as firm size increases, openings and closings account for a
decreasing share of gross employment changes.  For example, openings and
closings make up over half of gross job gains and losses for firms with 1-4
employees, but only about 1 percent of the gains and losses for firms with
1,000 or more employees.  (See table D.)

Table C.  Average quarterly level of gross job gains and gross job losses by
firm size, third quarter 1992-first quarter 2005, seasonally adjusted
										
(In thousands)										
------------------------------------------------------------------------------
                 |
                 |                 Size class (number of employees)
    Category     |------------------------------------------------------------
                 |       |     |     |     |     |     | 100 | 250| 500| 1,000
                 | Total | 1-4 | 5-9 |10-19|20-49|50-99|  -  |  - |  - |   or
                 |       |     |     |     |     |     | 249 | 499| 999|  more
------------------------------------------------------------------------------
Gross job gains..| 6,666 | 950 | 766 | 794 | 951 | 606 | 652 | 396| 326| 1,225 
   At expanding..|       |     |     |     |     |     |     |    |    |
     firms.......| 5,573 | 387 | 591 | 667 | 843 | 559 | 618 | 381| 316| 1,211
   At opening    |       |     |     |     |     |     |     |    |    |
     firms.......| 1,093 | 563 | 175 | 127 | 108 |  47 |  34 |  15|  10|    14
                 |       |     |     |     |     |     |     |    |    |  
Gross job losses.| 6,260 | 911 | 738 | 761 | 901 | 568 | 605 | 367| 301| 1,108 
   At contracting|       |     |     |     |     |     |     |    |    |
     firms.......| 5,191 | 388 | 573 | 636 | 790 | 516 | 562 | 347| 288| 1,091
   At closing    |       |     |     |     |     |     |     |    |    |
     firms.......| 1,069 | 523 | 165 | 125 | 111 |  52 |  43 |  20|  13|    17
                 |------------------------------------------------------------
Net change.......|   406 |  39 |  28 |  33 |  50 |  38 |  47 |  29|  25|   117
------------------------------------------------------------------------------


Table D.  Average percentage share(1) of gross job gains and gross job losses,
by firm size, third quarter 1992-first quarter 2005, seasonally adjusted

(Percent)										
------------------------------------------------------------------------------
            |              Size class (number of employees)                                                                 
            |-----------------------------------------------------------------
  Category  |     |      |      |      |      |      | 100 | 250 | 500 | 1,000
            |Total| 1-4  | 5-9  | 10-19| 20-49| 50-99|  -  |  -  |  -  |   or
            |     |      |      |      |      |      | 249 | 499 | 999 |  more
------------------------------------------------------------------------------
Gross job   |     |      |      |      |      |      |     |     |     |
  gains.....| 100 | 14.3 | 11.5 | 11.9 | 14.3 |  9.1 |  9.8|  5.9|  4.9|  18.4
Expansions..| 100 |  6.9 | 10.6 | 12.0 | 15.1 | 10.0 | 11.1|  6.8|  5.7|  21.7
Openings....| 100 | 51.5 | 16.0 | 11.6 |  9.9 |  4.3 |  3.1|  1.4|   .9|   1.3
            |     |      |      |      |      |      |     |     |     | 
Gross job   |     |      |      |      |      |      |     |     |     |
  losses....| 100 | 14.6 | 11.8 | 12.2 | 14.4 |  9.1 |  9.7|  5.9|  4.8|  17.7
Contractions| 100 |  7.5 | 11.0 | 12.3 | 15.2 |  9.9 | 10.8|  6.7|  5.5|  21.0
Closings....| 100 | 48.9 | 15.4 | 11.7 | 10.4 |  4.9 |  4.0|  1.9|  1.2|   1.6
------------------------------------------------------------------------------
Net change..| 100 |  9.6 |  6.9 |  8.1 | 12.3 |  9.4 | 11.6|  7.1|  6.2|  28.8
------------------------------------------------------------------------------
Cumulative share  |      |      |      |      |      |     |     |     |
  of net change...|  9.6 | 16.5 | 24.6 | 36.9 | 46.3 | 57.9| 65.0| 71.2| 100.0
------------------------------------------------------------------------------
  1 Share measures the percent of the category represented by each firm size
class.

                                  - 4 -

2001 Recession and Recovery
   
   Firm-size class data also can be used to analyze patterns of employ-
ment changes among firms of varying sizes across the business cycle.  All
firm-size classes experienced at least one quarter of negative net employ-
ment change related to the 2001 recession, but the larger size classes ex-
perienced more quarters of net loss than the smaller classes.  Firms with
250-499 employees and firms with 500-999 employees both saw the longest
period of net losses, lasting 10 consecutive quarters, from the first quar-
ter of 2001 through the second quarter of 2003.  During the same period,
the smallest size class, 1-4 employees, experienced only two quarters of
net job loss and size class 5-9 employees had just four quarters of net job
loss.  (See tables 1-10.)
   
   During the period for which the BED data are available, overall em-
ployment declined in eight quarters--the last three quarters of 2001 and
the second quarter of 2002 through the second quarter of 2003.  During
these eight quarters, firms with 500 or more employees accounted for 60
percent of net job losses.  This is in contrast to the 35-percent average
contribution of this group to the net gain in employment from September
1992 through March 2005.
   
   The net employment declines associated with the 2001 recession are most
evident in firms with 1,000 or more employees.  Firms in this category had
a net employment loss in the third quarter of 2001 of 578,000, making up
41.7 percent of the overall net employment decline.  This largest firm-size
class did not show sustained growth on a quarterly basis until September
2003.  (See table 10.)
   
   More recently, there have been seven consecutive quarters of overall net
employment growth, from September 2003 through March 2005.  Firms with 500
or more employees added 1.0 million new jobs, representing 35.9 percent of
the 2.8 million net jobs gained during this period.  Firms with fewer than
500 employees accounted for the remaining 1.8 million jobs, representing
64.1 percent of the total net job gains.  During this same period, firms
with 1,000 or more employees added 842,000 jobs, representing 30.3 percent
of the total net job gains.

First Quarter 2005
   
   From December 2004 to March 2005, the most recent quarter for which the
data are available, there were 6.3 million gross job gains and 6.0 million
gross job losses by firms of all sizes, resulting in a net gain of 298,000
jobs, or 0.2 percent of total employment.  Firms with 1,000 or more employ-
ees had 1.1 million gross job gains, the largest gross job gains of any
size class.  The same size class had 981,000 gross job losses, leading to
a net increase of 95,000 jobs in this size group.  This net job increase
represented the largest net employment gain among firms of all sizes, and
accounted for 31.9 percent of the total net change in employment in the
quarter.  (See tables E and F.)
   
   Firms with 1-4 employees had gross job gains of 984,000 and gross job
losses of 976,000 jobs in the first quarter of 2005, the second largest
number of both gross job gains and losses among these size classes.  How-
ever, the net gain of 8,000 jobs in this size class represents the second
smallest net gain in all size classes.

                                  - 5 -

   In the first quarter of 2005, firms with less than 500 employees repre-
sented 60.7 percent of total net change, while firms with 500 or more em-
ployees represented the remaining 39.3 percent of net change.  (See table F.)
   
   The rates of gross job gains and gross job losses in the smaller size
classes are greater than those in the larger size classes.  The rate is a
measure of gains and losses as a percent of employment during the quarter
and represents the extent of "job churning" in each size class.  During the
first quarter of 2005, in the firms with 1-4 employees, the rates of both
gross job gains and gross job losses equaled 17.3 percent of quarterly em-
ployment, while in the firms with 1,000 or more employees, gross job gains
and gross job losses accounted for only 2.6 and 2.4 percent, respectively,
of employment.  (See table E.)

   Due to the high numbers of openings and closings in the 1-4 employee
size class, firms of this size accounted for 55.5 percent of gross job
gains at opening firms and 55.1 percent of gross job losses at closing
firms.  The share of gross job gains and losses due to openings and
closings drop sharply as the size class increases.  (See table F.)
   
Table E.  Level and rate of gross job gains and losses by firm size, first
quarter 2005, seasonally adjusted 
------------------------------------------------------------------------------
                 |              Size class (number of employees)
                 | -----------------------------------------------------------
                 |       |     |     |     |     |     | 100 |250 |500 | 1,000
   Category      | Total | 1-4 | 5-9 |10-19|20-49|50-99|  -  | -  | -  |   or
                 |       |     |     |     |     |     | 249 |499 |999 |  more
                 |------------------------------------------------------------
                 |                    Level (in thousands)
------------------------------------------------------------------------------
Gross job gains..| 6,345 | 984 | 770 | 780 | 912 | 564 | 604 |364 |291 | 1,076 
   At expanding  |       |     |     |     |     |     |     |    |    |
     firms.......| 5,249 | 376 | 582 | 652 | 814 | 527 | 581 |356 |287 | 1,074
   At opening    |       |     |     |     |     |     |     |    |    |
     firms.......| 1,096 | 608 | 188 | 128 |  98 |  37 |  23 |  8 |  4 |     2
                 |       |     |     |     |     |     |     |    |    |
Gross job losses.| 6,047 | 976 | 763 | 765 | 879 | 533 | 553 |328 |269 |   981
   At contract-  |       |     |     |     |     |     |     |    |    |
     ing firms...| 5,003 | 401 | 592 | 649 | 788 | 495 | 524 |315 |262 |   977
   At closing    |       |     |     |     |     |     |     |    |    |
     firms.......| 1,044 | 575 | 171 | 116 |  91 |  38 |  29 | 13 |  7 |     4
                 |------------------------------------------------------------
Net change.......|   298 |   8 |   7 |  15 |  33 |  31 |  51 | 36 | 22 |    95
------------------------------------------------------------------------------
                                  Rate (percent of employment)                                            
------------------------------------------------------------------------------
Gross job gains..|   5.8 |17.3 |11.5 | 9.3 | 7.5 | 6.2 | 5.2 |4.6 |4.0 |   2.6
   At expanding  |       |     |     |     |     |     |     |    |    |
     firms.......|   4.8 | 6.6 | 8.7 | 7.8 | 6.7 | 5.8 | 5.0 |4.5 |3.9 |   2.6
   At opening    |       |     |     |     |     |     |     |    |    |
     firms.......|   1.0 |10.7 | 2.8 | 1.5 | 0.8 | 0.4 | 0.2 |0.1 |0.1 |   0.0
                 |       |     |     |     |     |     |     |    |    | 
Gross job losses.|   5.6 |17.3 |11.3 | 9.2 | 7.3 | 5.8 | 4.8 |4.2 |3.6 |   2.4
   At contract-  |       |     |     |     |     |     |     |    |    |
     ing firms...|   4.6 | 7.1 | 8.8 | 7.8 | 6.5 | 5.4 | 4.5 |4.0 |3.5 |   2.4
   At closing    |       |     |     |     |     |     |     |    |    |
     firms.......|   1.0 |10.2 | 2.5 | 1.4 | 0.8 | 0.4 | 0.3 |0.2 |0.1 |   0.0
                 |------------------------------------------------------------
Net change.......|   0.2 | 0.0 | 0.2 | 0.1 | 0.2 | 0.4 | 0.4 |0.4 |0.4 |   0.2
------------------------------------------------------------------------------

                                  - 6 -

Table F.  Firm size percentage share(1) of gross job gains and losses, first
quarter 2005, seasonally adjusted                                                                                                                       "

(Percent)
------------------------------------------------------------------------------
            |                 Size class (number of employees)                                                                 
            |-----------------------------------------------------------------
  Category  |     |      |      |      |      |      |     |     |     | 1,000
            |Total| 1-4  |  5-9 | 10-19| 20-49| 50-99| 100-| 250-| 500-|   or
            |     |      |      |      |      |      | 249 | 499 | 999 |  more
------------------------------------------------------------------------------
Gross job   |     |      |      |             |      |     |     |     |
  gains.....| 100 | 15.5 | 12.1 | 12.3 | 14.4 |  8.9 |  9.5|  5.7|  4.6|  17.0
Expansions..| 100 |  7.2 | 11.1 | 12.4 | 15.5 | 10.0 | 11.1|  6.8|  5.5|  20.5
Openings....| 100 | 55.5 | 17.2 | 11.7 |  8.9 |  3.4 |  2.1|  0.7|  0.4|   0.2
            |     |      |      |      |      |      |     |     |     | 
Gross job   |     |      |      |      |      |      |     |     |     |
  losses....| 100 | 16.1 | 12.6 | 12.7 | 14.5 |  8.8 |  9.1|  5.4|  4.4|  16.2
Contractions| 100 |  8.0 | 11.8 | 13.0 | 15.8 |  9.9 | 10.5|  6.3|  5.2|  19.5
Closings....| 100 | 55.1 | 16.4 | 11.1 |  8.7 |  3.6 |  2.8|  1.2|  0.7|   0.4
------------------------------------------------------------------------------
Net change..| 100 |  2.7 |  2.3 |  5.0 | 11.1 | 10.4 | 17.1| 12.1|  7.4|  31.9
------------------------------------------------------------------------------
Cumulative share  |      |      |      |      |     |      |     |     | 
  of net change   |  2.7 |  5.0 | 10.1 | 21.1 | 31.5|  48.7| 60.7| 68.1| 100.0
------------------------------------------------------------------------------
  1 Share measures the percent of the category represented by each firm size
class.

Methodology
   
   Firms, rather than establishments, are used in the tabulation of these
size-class statistics.  An establishment is defined as an economic unit
that produces goods or services, usually at a single physical location, and
engages in one, or predominantly one, activity.  A firm is defined as an
aggregation of establishments under common ownership by a corporate parent.
Firm-level data are compiled by aggregating records under the same employer
tax identification numbers.  Total gross job gains and gross job losses
reported in this release are lower than previously released gross job gain
and gross job loss statistics computed at the establishment level, as some
establishment gains and losses within a firm are offset during the aggrega-
tion process.
   
   The Bureau of Labor Statistics considered a number of methodologies for
use in examining firm–size class dynamics before deciding to use the method
of dynamic sizing for these calculations.  Dynamic sizing allocates each
firm's employment growth or loss during a quarter to each respective size
class in which the change occurred.  For example, if a firm grew from 2
employees in the first quarter to 38 employees in the second quarter, then
of the 36-employee increase, 2 jobs would be allocated to the 1-4 size
class, 5 jobs would be allocated to the 5-9 size class, 10 jobs would be
allocated to the 10-19 size class, and 19 jobs would be allocated to the
20-49 size class.
   
   Dynamic sizing accounts for the transitory changes in employment across
size classes that result largely from the seasonal variations in the quar-
terly employment data.  Additionally, it has a clear conceptual foundation
by allocating each job gain or loss to the actual size class where it oc-
curred.  For more information, see the "Dynamic sizing methodology" section
of the Technical Note.

                                  - 7 -

More Information
     
   In the future, Business Employment Dynamics data by size of firm will be
released each quarter as a part of the quarterly Business Employment Dynamics
news release.  Additional information is available on the Business Employment
Dynamics Web page at http://www.bls.gov/bdm.  Research data on alternative
sizing methods will be updated on a periodic basis.  Additional information
about the Business Employment Dynamics data can be found in the Technical
Note of this release or may be obtained by e-mailing BDMinfo@bls.gov.

     ------------------------------------------------------------------
   |     Comparing Business Employment Dynamics Data with Current      |
   |     Employment Statistics and Quarterly Census of Employment      |
   |                          and Wages Data                           |
   |                                                                   |
   |    The Business Employment Dynamics (BED) data series are derived |
   | from the Quarterly Census of Employment and Wages (QCEW), also    |
   | known as the ES-202 program.  This program is a quarterly census  |
   | of all firms covered under state unemployment insurance programs, |
   | representing about 98 percent of employment on nonfarm payrolls.  |
   | The net change in employment from the BED data series will not    |
   | match the estimates from employment series such as the monthly    |
   | Current Employment Statistics (CES) survey or the totals from     |
   | the QCEW program.  The CES estimates are based on a sample of     |
   | establishments, while gross job gains and gross job losses are    |
   | based on a quarterly census of administrative records.  In ad-    |
   | dition, the CES has a different coverage, excluding the agri-     |
   | culture sector but including firms not covered by the unemploy-   |
   | ment insurance program.  The BED data have a more limited scope   |
   | than the QCEW data.  The data in this release, in contrast to     |
   | QCEW data, exclude government employees, private households       |
   | (NAICS 814110), and firms with zero employment.  See the Tech-    |
   | nical Note for further information.                               |
    -------------------------------------------------------------------          






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Last Modified Date: December 08, 2005
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