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Future Developments in Business Employment Dynamics

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Job 'churning', or reallocation, not seen in net job data ... States with high rates of job growth tended to have higher rates of job churn ... – PowerPoint PPT presentation

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Title: Future Developments in Business Employment Dynamics


1
Future Developments in Business Employment
Dynamics
  • Kristin Fairman, Sheryl Konigsberg

Views expressed here are those of the authors and
not BLS.
2
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data

3
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

4
What are Business Employment Dynamics?
  • Set of statistics measuring changes in employment
    at the establishment level
  • BED data demonstrate the idea that jobs are
    constantly created and destroyed
  • Job growth is the net result of jobs being
    created, or gained, and destroyed, or lost
  • Data source for BED is the Quarterly Census of
    Employment and Wages

5
Quarterly Census of Employment and Wages
  • Census of all U.S. establishments
  • at least one employee
  • accounts for nearly 98 of all U.S. non-farm
    workers
  • QCEW is a universe, or complete list, and is not
    subject to errors such as sampling or estimation
    error

6
BED Components
  • Establishment economic unit that produces goods
    or services, usually one physical location
  • Gross Job Gains sum of employment at opening
    and expanding establishments
  • Openings establishments that did not exist or
    reported zero employment in the prior quarter and
    report positive employment in the current quarter
  • Expansions establishments that report employment
    increases over the quarter

7
BED Components
  • Gross Job Losses sum of employment at closing
    and contracting establishments
  • Closings establishments reporting positive
    employment in the prior quarter and report zero
    employment or do not exist in the current quarter
  • Contractions - existing establishments that
    report employment decreases over the quarter

8
How are BED data used?
  • BED data used to assess
  • the business cycle
  • the level of labor market volatility
  • the effect of establishment employment changes on
    aggregate employment
  • A decrease in employment stemming from gross job
    gains decreasing has far different business cycle
    implications than a decrease due to gross job
    losses increasing

9
Current BED Data
  • National data
  • first published for fourth quarter 2002
  • National data by industry
  • first released for third quarter 2003
  • National data by firm size class
  • first released for second quarter 2005
  • All data is available from third quarter 1992

10
Why BED is so exciting
  • Job churning, or reallocation, not seen in net
    job data
  • Expansions and contractions are larger than at
    openings and closings
  • Gross job gains and losses have business cycle
    properties
  • Gross job gains remained low in 2006, while gross
    job losses are on decline

11
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12
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13
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

14
Recent Developments Industry
  • Service-providing and goods-producing sectors
    created more jobs than they destroyed during 2005
    and 2006
  • Job creation and destruction has slowed in most
    industries
  • Construction industry
  • Education and healthcare industry
  • Manufacturing sector
  • experiencing a decline in the overall number of
    jobs
  • the numbers of gross jobs lost has been declining
    in recent quarters

15
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16
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17
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

18
Recent Developments Size Class
  • Largest and smallest firms have largest shares of
    gross job gains and gross job losses
  • Smallest firms tend to have the highest share of
    jobs created from openings and jobs lost from
    closings
  • Largest firms tend to have the highest share of
    jobs created from expansions and jobs lost from
    contractions
  • Firms with 1000 or more employees and firms with
    20-49 employees have been the largest
    contributors to net job growth

19
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20
Recent Developments Size Class
  • Jessica Helfand, Akbar Sadeghi, Employment
    Dynamics small and large firms over the business
    cycle, March 2007
  • Small firms, those with 1 to 499 employees,
    create about 64 percent of new jobs
  • Share of growth of small firms is larger than
    their base share of employment causing small
    firms to become large, increasing the employment
    share of large firms over time
  • Firms of different size class behave differently
    throughout the phases of the business cycle
  • Contribution of large firms to net job gains
    during the current economic recovery appears to
    come from a fall in gross job losses, rather than
    increased job creation
  • Bulk of net job losses in the 1991 recession
    occurred in small firms, while large firms
    generated the majority of job losses during the
    economic slowdown of 2001

21
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

22
Firm Survival
  • Amy Knaup, Survival and Longevity in the
    Business Employment Dynamics Data, May 2005
  • 66 of business establishments opening in second
    quarter of 1998 were still in existence 2 years
    later
  • Amy Knaup and Merissa Piazza, "Establishment
    Survival Using the BLS Longitudinal Database,"
    December 2006
  • Extends original cohort through 2005

23
Firm SurvivalSeven Year Survival Study
  • Findings from Knaup, Piazza study
  • Survival rates across industries tend to stay
    consistent over time
  • Employment patterns still vary more than survival
    rates
  • Surviving establishments continue to increase
    employment over their lifetime
  • A greater percentage of establishments survive in
    the fifth year and beyond

24
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25
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

26
Future BED Developments State data
  • Expected release date Summer 2007
  • Preliminary data for second quarter 2006 shows
  • Gross job gains exceeded gross job losses in 43
    states
  • Alaska had the highest rates of gross job gains,
    gross job losses and net change
  • Preliminary data for September 1992 to June 2006
    shows
  • States with high rates of job growth tended to
    have higher rates of job churn
  • Nevada had the largest net change in employment
  • Alaska had the highest rates of both gross job
    gains and gross job losses

27
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28
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

29
Ongoing BED ResearchAnnual data
  • Josh Pinkston and Jim Spletzer paper analyzed
    annual BED data
  • "Annual Measures of Job Creation and Job
    Destruction Created from Quarterly Microdata"
  • Openings, expansions, closings and contractions
    CAN NOT be summed through the year to get an
    annual number

30
Ongoing BED Research Annual data
  • Preliminary data shows
  • Over calendar year 2005, 26.4 million jobs were
    created and destroyed
  • 14.3 million jobs were gained and 12.1 million
    jobs were lost
  • 2.1 million new jobs were added to the U.S. labor
    market
  • 131,000 new establishments were added to the
    economy

31
Agenda
  • Business Employment Dynamics (BED)
  • What are business employment dynamics?
  • BED components
  • How are BED data used?
  • Current BED data
  • Why BED is so exciting
  • Recent BED Developments
  • Industry data
  • Size class data
  • Firm survival
  • Future BED Developments
  • State data
  • Ongoing BED Research
  • Annual data
  • Birth and Death data
  • Establishment age
  • Entrepreneurship

32
Ongoing BED Research Establishment Births and
Deaths
  • How are births different from openings?
  • Opening any establishment that reports positive
    employment in current quarter and did not exist
    or was reporting zero employment in just the ONE
    prior quarter
  • Birth any establishment that reports positive
    employment in current quarter and did not exist
    or had zero employment for the prior FOUR
    quarters
  • The difference between openings and births are
    seasonal re-openings

33
Ongoing BED Research Establishment Births and
Deaths
  • How are deaths different from closings?
  • Closing any establishment that was reporting
    positive employment in prior quarter but has zero
    employment or does not exist in the ONE following
    quarter
  • Death any establishment that was reporting
    positive employment in prior quarter but has zero
    employment or does not exist in the FOUR
    following quarters
  • The difference between closings and deaths are
    temporary shutdowns

34
Ongoing BED Research Establishment Births and
Deaths
  • Preliminary estimates show
  • In 2006 first quarter, there were 219,000 births
  • 368,000 openings over same period
  • In 2005 first quarter, there were 185,000 deaths
  • 348,000 closings over same period
  • Data is seasonally adjusted

35
Measuring Births and Deaths in Business
Employment Dynamics Data Series
  • Akbar Sadeghi
  • Preliminary data for research purposes only do
    not cite.

36
Separating Births from Openings and Deaths from
Closings
  • Openings
  • Establishments with employment for the first time
    at the end of the quarter, or establishments
    that increase their third month employment from
    zero.
  • Openings include births and re-openings of
    seasonal businesses.
  • Closings
  • Establishments with Positive third month
    employment in the previous quarter and zero
    employment in the current quarter.
  • Closings include deaths and temporary shutdown of
    seasonal businesses.
  • Estimates of births and deaths will lead to other
    measures of business demographics such as
  • Age
  • Survival rates
  • Entrepreneurship

37
How to Measure Births and Deaths
  • Two main approaches
  • First appearance (births) and last appearance
    (deaths) in database with positive employment.
  • Zero or no employment in several quarters
    followed by positive employment (births), and
    positive employment in a quarter followed by zero
    employment for several quarters (deaths)
  • We selected the second approach. Some records
    appear for the first time with zero employment,
    not counted as births in the first approach.

38
How to Measure Births and Deaths
  • What month of employment?
  • For the second approach, what month of employment
    should be used? Third month or all three months
    of quarters?
  • How many months or how many third months should
    be considered in identifying a birth in the
    second approach?
  • To be consistent with other BED data elements, we
    selected the third month as employment reference
    month.
  • We selected 4 quarters of zero or no employment
    for both birth and death definitions
  • Birth Positive third month employment followed
    four quarters of zero or no employment.
  • Death four quarters of zero employment followed
    the last quarter of positive third month
    employment
  • Including the current quarter, five quarters of
    employment are compared for each record.
  • Five quarters eliminate the seasonality effects.

39
How many birth options tested?
  • Option 1 births are new records that appeared
    for the first time in the database with positive
    third month employment.
  • Option 2 births are records with positive
    employment in the third month of a quarter and
    zero or no employment in the third month of the
    last four quarters.
  • Option3 births are records with positive
    employment in the third month of a quarter and
    zero or no employment in the last five quarters.
  • Option 4 births are records with positive
    employment in the third month of a quarter and
    zero or no employment in all months over of the
    last four quarters.
  • Option 5 births are records with positive
    employment in the third month of a quarter and
    zero or no employment in all months over of the
    last five quarters.
  • Firm level births or entrepreneurial births.

40
Entrepreneurial Births
  • Entrepreneurial births are births at the firm
    level, as opposed to establishment level
  • Establishment an economic unit engaged in one or
    predominantly one activity at single location
  • Firm may consist of several establishments.
    Firm-level data are compiled on aggregation of
    establishment under common ownership.
  • A new addition to a multi-unit firm is a birth,
    but not an entrepreneurial birth.

41
Number of Births
42
Job Gains from births
43
Number of Births is rising
44
Declining average size of births and rising
productivity
45
Job growth vs. net establishment growth (birth
rate minus death rate)
46
Births per 1000 in labor force
47
Conclusion
  • Recent developments currently being released
  • National BED data by industry
  • National BED data by size class
  • Future developments
  • BED data by state
  • Expected release summer 2007
  • Ongoing BED research
  • Annual BED data
  • Establishment Births and Deaths
  • Establishment Age
  • Entrepreneurship

48
For any comments or questions, please contact
  • bdminfo_at_bls.gov
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