Technical Notes to Establishment Survey Data Published in Employment and Earnings

BLS collects data each month on employment, hours, and earnings from a sample of nonfarm establishments. The sample includes about 150,000 businesses and government agencies, which cover approximately 390,000 individual worksites drawn from a sampling frame of roughly 8.9 million Unemployment Insurance tax accounts. The active CES sample includes approximately one-third of all nonfarm payroll workers. From these data, a large number of employment, hours, and earnings series in considerable industry and geographic detail are prepared and published each month. Historical statistics are available at http://www.bls.gov/ces/, the BLS Internet site.

Data collection

Each month, BLS collects data on employment, payroll, and paid hours from a sample of establishments. BLS has a comprehensive program of new sample unit solicitation in three BLS Regional Data Collection Centers (DCCs). The DCCs perform initial enrollment of each firm via telephone, collect the data for several months via Computer Assisted Telephone Interviewing (CATI) and where possible transfer respondents to a self-reporting mode such as Touchtone Data Entry (TDE), FAX or Internet collection. In addition, the DCC's conduct an ongoing program of refusal conversion. Very large firms are often enrolled via personal visit and ongoing reporting is established via Electronic Data Interchange (EDI).

EDI is the most frequently used collection mode, while CATI and TDE are each used by nearly one-quarter and one-sixth of the respondents, respectively. Under EDI, the firm provides an electronic file to BLS each month in a prescribed file format. This file includes data for all of the firm's worksites. The file is received, processed, and edited by the BLS operated EDI Center. Under the TDE system, the respondent uses a touchtone telephone to call a toll-free number and activate an interview session. The questionnaire resides on the computer in the form of prerecorded questions that are read to the respondent. The respondent enters numeric responses by pressing the touchtone phone buttons. Each answer is read back for respondent verification.

Internet collection, another self-reporting mode, is one of the fastest growing collection methods. Under internet collection, the respondent links to a secure website that contains an image of the questionnaire and enters their data into the on-line form. While still a small piece of the CES sample collected each month, the share of reports on Internet collection has risen to around 7 percent, with most of the growth occurring in the last two years.

CATI and FAX collection through the combined Regional BLS DCCs account for most of the remainder of the reports. For the few establishments that do not use the above methods, data are collected using mail, FAX, transcript, magnetic tape or computer diskette.

Chart 1 shows the percentage of the establishments using different data collection methods.

Concepts

Industrial classification

All data on employment, hours, and earnings for the Nation and for States and areas are classified in accordance with the 2007 North American Industry Classification System (NAICS), specified by the U.S. Office of Management and Budget. The United States, Canada, and Mexico share this classification system, and thus it allows a direct comparison of economic data across the three countries.

Establishments are classified into industries on the basis of their primary activity. Those that use comparable capital equipment, labor, and raw material inputs are classified together. This information is collected on a supplement to the quarterly unemployment insurance tax reports filed by employers. For an establishment engaging in more than one activity, the entire employment of the establishment is included under the industry indicated by the principal activity.

Industry employment

Employment data refer to persons on establishment payrolls who received pay for any part of the pay period that includes the 12th day of the month.

The data exclude proprietors, the unincorporated self-employed, unpaid volunteer or family workers, farmworkers, and domestic workers. Salaried officers of corporations are included. Government employment covers only civilian employees; military personnel are excluded. Employees of the Central Intelligence Agency, the National Security Agency, the National Imagery and Mapping Agency, and the Defense Intelligence Agency also are excluded.

Persons on establishment payrolls who are on paid sick leave (for cases in which pay is received directly from the firm), on paid holiday, or on paid vacation, or who work during a part of the pay period even though they are unemployed or on strike during the rest of the period are counted as employed. Not counted as employed are persons who are on layoff, on leave without pay, or on strike for the entire period, or who were hired but have not yet reported during the period.

Industry hours and earnings

Average hours and earnings data are derived from reports of payrolls and hours for production and related workers in manufacturing and natural resources and mining, construction workers in construction, and nonsupervisory employees in private service-providing industries.

Production and related workers. This category includes working supervisors and all nonsupervisory workers (including group leaders and trainees) engaged in fabricating, processing, assembling, inspecting, receiving, storing, handling, packing, warehousing, shipping, trucking, hauling, maintenance, repair, janitorial, guard services, product development, auxiliary production for plant's own use (for example, power plant), recordkeeping, and other services closely associated with the above production operations.

Construction workers. This group includes the following employees in the construction sector: Working supervisors, qualified craft workers, mechanics, apprentices, helpers, laborers, and so forth, engaged in new work, alterations, demolition, repair, maintenance, and the like, whether working at the site of construction or in shops or yards at jobs (such as precutting and preassembling) ordinarily performed by members of the construction trades.

Nonsupervisory employees. These are employees (not above the working-supervisor level) such as office and clerical workers, repairers, salespersons, operators, drivers, physicians, lawyers, accountants, nurses, social workers, research aides, teachers, drafters, photographers, beauticians, musicians, restaurant workers, custodial workers, attendants, line installers and repairers, laborers, janitors, guards, and other employees at similar occupational levels whose services are closely associated with those of the employees listed.

Payroll. This refers to the payroll for full- and part-time production, construction, and nonsupervisory workers who received pay for any part of the pay period that includes the 12th day of the month. The payroll is reported before deductions of any kind, such as those for old-age and unemployment insurance, group insurance, withholding tax, bonds, or union dues; also included is pay for overtime, holidays, and vacation, and for sick leave paid directly by the firm. Bonuses (unless earned and paid regularly each pay period); other pay not earned in the pay period reported (such as retroactive pay); and the value of free rent, fuel, meals, or other payment in kind are excluded. Employee benefits (such as health and other types of insurance, contributions to retirement, and so forth, paid by the employer) also are excluded.

Hours. These are the hours paid for during the pay period that includes the 12th of the month for production, construction, and nonsupervisory workers. Included are hours paid for holidays and vacations, and for sick leave when pay is received directly from the firm.

Overtime hours. These are hours worked by production and related workers for which overtime premiums were paid because the hours were in excess of the number of hours of either the straight-time workday or the workweek during the pay period that included the 12th of the month. Weekend and holiday hours are included only if overtime premiums were paid. Hours for which only shift differential, hazard, incentive, or other similar types of premiums were paid are excluded.

Average weekly hours. The workweek information relates to the average hours for which pay was received and is different from standard or scheduled hours. Such factors as unpaid absenteeism, labor turnover, part-time work, and stoppages cause average weekly hours to be lower than scheduled hours of work for an establishment. Group averages further reflect changes in the workweek of component industries.

Indexes of aggregate weekly hours and payrolls. The indexes of aggregate weekly hours are calculated by dividing the current month's aggregate by the average of the 12 monthly figures for 2002. For basic industries, the hours aggregates are the product of average weekly hours and production worker or nonsupervisory worker employment. At all higher levels of industry aggregation, hours aggregates are the sum of the component aggregates.

The indexes of aggregate weekly payrolls are calculated by dividing the current month's aggregate by the average of the 12 monthly figures for 2002. For basic industries, the payroll aggregates are the product of average hourly earnings and aggregate weekly hours. At all higher levels of industry aggregation, payroll aggregates are the sum of the component aggregates.

Average overtime hours. Overtime hours represent that portion of average weekly hours that exceeded regular hours and for which overtime premiums were paid. If an employee were to work on a paid holiday at regular rates, receiving as total compensation his holiday pay plus straight-time pay for hours worked that day, no overtime hours would be reported.

Because overtime hours are premium hours by definition, weekly hours and overtime hours do not necessarily move in the same direction from month to month. Such factors as work stoppages, absenteeism, and labor turnover may not have the same influence on overtime hours as on average hours. Diverse trends at the industry group level also may be caused by a marked change in hours for a component industry in which little or no overtime was worked in both the previous and current months.

Average hourly earnings. Average hourly earnings are on a "gross" basis. They reflect not only changes in basic hourly and incentive wage rates, but also such variable factors as premium pay for overtime and late-shift work and changes in output of workers paid on an incentive plan. They also reflect shifts in the number of employees between relatively high-paid and low-paid work and changes in workers' earnings in individual establishments. Averages for groups and divisions further reflect changes in average hourly earnings for individual industries.

Averages of hourly earnings differ from wage rates. Earnings are the actual return to the worker for a stated period; rates are the amount stipulated for a given unit of work or time. The earnings series do not measure the level of total labor costs on the part of the employer because the following are excluded: Benefits, irregular bonuses, retroactive items, payroll taxes paid by employers, and earnings for those employees not covered under production worker, construction worker, or nonsupervisory employee definitions.

Average hourly earnings, excluding overtime. Average hourly earnings, excluding overtime-premium pay, are computed by dividing the total production worker payroll for the industry group by the sum of total production worker hours and one-half of total overtime hours. No adjustments are made for other premium payment provisions, such as holiday pay, late-shift premiums, and overtime rates other than time and one-half.

Average weekly earnings.  These estimates are derived by multiplying average weekly hours estimates by average hourly earnings estimates. Therefore, weekly earnings are affected not only by changes in average hourly earnings but also by changes in the length of the workweek. Monthly variations in such factors as the proportion of part-time workers, stoppages for varying reasons, labor turnover during the survey period, and absenteeism for which employees are not paid may cause the average workweek to fluctuate.

Long-term trends of average weekly earnings can be affected by structural changes in the makeup of the workforce. For example, persistent long-term increases in the proportion of part-time workers in retail trade and many of the services industries have reduced average workweeks in these industries and have affected the average weekly earnings series.

Real earnings. These earnings are in constant dollars and are calculated from the earnings averages for the current month using a deflator derived from the Consumer Price Index for Urban Wage Earnings and Clerical Workers (CPI-W). The base year for these series is 1982.

Indexes of diffusion of employment change. These indexes measure the dispersion of change in employment industries over the specified time span. The overall indexes are calculated from 274 seasonally adjusted employment series (4-digit NAICS industries) covering all nonfarm payroll employment in the private sector. The manufacturing diffusion indexes are based on 84 4-digit NAICS industries.

To derive the indexes, each component industry is assigned a value of 0, 50, or 100 percent, depending on whether its employment showed a decrease, no change, or an increase, respectively, over the time span. The average value (mean) is then calculated, and this percent is the diffusion index number.

The reference point for diffusion analysis is 50 percent, the value indicating that the same number of component industries had increased as had decreased. Index numbers above 50 show that more industries had increasing employment and values below 50 indicate that more had decreasing employment. The margin between the percent that increased and the percent that decreased is equal to the difference between the index and its complement - that is, 100 minus the index. For example, an index of 65 percent means that 30 percent more industries had increasing employment than had decreasing employment (65-(100-65) = 30). However, for dispersion analysis, the distance of the index number from the 50-percent reference point is the most significant observation.

Although diffusion indexes commonly are interpreted as showing the percent of components that increased over the time span, the index reflects half of the unchanged components as well. (This is the effect of assigning a value of 50 percent to the unchanged components when computing the index.)

ESTIMATING METHODS

The Current Employment Statistics (CES) or establishment survey estimates of employment are generated through an annual benchmark and monthly sample link procedure. Annual universe counts or benchmark levels are generated primarily from administrative records on employees covered by unemployment insurance (UI) tax laws. These annual benchmarks, established for March of each year, are projected forward for each subsequent month based on the trend of the sample employment and an adjustment for the net of business births and deaths. Benchmarks and monthly estimates are computed for each basic estimating cell and summed to create aggregate-level employment estimates.

Benchmarks

For the establishment survey, annual benchmarks are constructed in order to realign the sample-based employment totals for March of each year with the UI-based population counts for March. These population counts are much less timely than sample-based estimates and are used to provide an annual point-in-time census for employment. For National series, only the March sample-based estimates are replaced with UI counts. For State and metropolitan area series, all available months of UI data are used to replace sample-based estimates. State and area series are based on smaller samples and are therefore more vulnerable to both sampling and non-sampling errors than National estimates.

Population counts are derived from the administrative file of employees covered by UI. All employers covered by UI laws are required to report employment and wage information to the appropriate State Workforce Agency four times a year. Approximately 97 percent of private and total nonfarm employment within the scope of the establishment survey is covered by UI. A benchmark for the remaining 3 percent is constructed from alternate sources, primarily records from the Railroad Retirement Board and County Business Patterns. The full benchmark developed for March replaces the March sample-based estimate for each basic cell. The monthly sample-based estimates for the year preceding and the year following the benchmark are also then subject to revision.

Monthly estimates for the year preceding the March benchmark are readjusted using a "wedge back" procedure. The difference between the final benchmark level and the previously published March sample estimate is calculated and spread back across the previous 11 months. The wedge is linear; eleven-twelfths of the March difference is added to the February estimate, ten-twelfths to the January estimate, and so on, back to the previous April estimate, which receives one-twelfth of the March difference. This assumes that the total estimation error since the last benchmark accumulated at a steady rate throughout the current benchmark year. 

Estimates for the 7 months following the March benchmark also are recalculated each year. These post-benchmark estimates reflect the application of sample-based monthly changes to new benchmark levels for March and the recomputation of business birth/death factors for each month.

Following the revision of basic employment estimates, all other derivative series (such as number of production workers and average hourly earnings) also are recalculated. New seasonal adjustment factors are calculated and all data series for the previous 5 years are re-seasonally adjusted before full publication of all revised data in February of each year.

Changing data ratios for Education and Religious Organizations 

Due to small sample in religious organizations, NAICS 8131, and definitional exclusions in the collection of data for educational services, NAICS 611, certain ratios for these series are recalculated with each benchmark to allow for the creation of aggregate totals. Production worker and women worker ratios, average hourly earnings, and average weekly hours for these series are calculated based on the weighted average of the previous year’s professional and technical services, education and health services, leisure and hospitality, and other services supersectors' annual averages. This year the March 2007 values were set based on the 2006 annual averages.

The education services series uses the nonsupervisory worker ratio, average hourly earnings, and average weekly hours calculated from the weighted average. The religious organizations series uses the production worker ratio, women worker ratio, average hourly earnings, and average weekly hours calculated from the weighted average. In both cases, the ratios, average hourly earnings, and average weekly hours are held constant through the next benchmark.

Monthly Estimation

CES uses a matched sample concept and weighted link relative estimator to produce employment, hours, and earnings estimates. These methods are described in table 2-A. A matched sample is defined to be all sample members that have reported data for the reference month and the month prior. Excluded from the matched sample is any sample unit that reports that it is out-of-business. This aspect of the estimation methodology is more fully described in the section on estimation of business births and deaths below.

Stratification. The sample is stratified into 639 basic estimation cells for purposes of computing national employment, hours, and earnings estimates. Cells are defined primarily by detailed industry. In the construction sector, geographic stratification is also used. The estimation cells can be defined at the 3-, 4-, 5-, and 6-digit NAICS level.

In addition to the estimation cells mentioned above, there are 37 independently estimated cells which do not aggregate to the summary cell levels.

Weighted link-relative technique. The estimator for the all employee series uses the sample trend in the cell to move the previous level to the current-month estimated level. A model-based component is applied to account for the net employment resulting from business births and deaths not captured by the sample.

The basic formula for estimating all employees is:

,

where:

i          = matched sample unit;

       = weight associated with the CES report;

     = current-month reported all employees;

  = previous-month reported all employees;

  = current-month estimated all employees; and

 = previous-month estimated all employees.

 

Weighted link and taper technique. The estimator used for all non-all employee datatypes accounts for the over-the-month change in the sampled units, but also includes a tapering feature used to keep the estimates close to the overall sample average over time. The taper is considered to be a level correction. This estimator uses matched sample data; it tapers the estimate toward the sample average for the previous month of the current matched sample before applying the current month's change; and it promotes continuity by heavily favoring the estimate for the previous month when applying the numerical factors.

Current month estimate of PW (production or non-supervisory workers) is defined as

    , where

  for all i I and j J

Current month estimate of WE (women employees)

Estimation of the series for women employees is identical to that described for production workers, with the appropriate substitution of women employees values for the production worker values in the previous formulas.

Current month estimate of AWH is defined as

 

  for all i I and j J

Current month estimate of AHE is defined as

   for all i I and j J

where:

i = a matched CES report

I = the set of all matched CES reports

j = a matched CES report where the current month is atypical

J = the set of all matched CES reports where the current month is atypical (Note: J is a subset of I)

            = weight associated with the CES report;

        = current month reported Production Workers

        = previous month reported Production Workers

      = current month reported Production Workers, atypical record

      = previous month reported Production Workers, atypical record

  = current month reported Production Workers, atypical WH record

  = previous month reported Production Workers, atypical WH record

        = current month estimated Production Workers

       = previous month estimated Production Workers

        = current month reported Weekly Hours

        = previous month reported Weekly Hours

      = current month reported Weekly Hours, atypical record

     = previous month reported Weekly Hours, atypical record

  = current month reported Weekly Hours, atypical PR record

  = previous month reported Weekly Hours, atypical PR record

       = current month estimated Aggregate Worker Hours

      = previous month estimated Aggregate Worker Hours

    = current month estimated Average Weekly Hours

  = previous month estimated Average Weekly Hours

       = current month reported Weekly Payroll

      = previous month reported Weekly Payroll

    = current month reported Weekly Payroll, atypical record

    = previous month reported Weekly Payroll, atypical record

   = current month estimated Average Hourly Earnings

  = previous month estimated Average Hourly Earnings

Current month estimate of OT (overtime hours)

Estimation of overtime hours is identical to that described for weekly hours, with the appropriate substitution of overtime hours values for the weekly hours values in the previous formula.

Small Domain Model. Beginning with the publication of the March 2006 benchmark revisions, National employment estimates for five industries are produced using the CES Small Domain Model (SDM). Relatively small sample sizes in these industries limit the reliability of the weighted-link-relative estimator for estimates of all employees (see Table 1). Estimation of nonsupervisory workers, average weekly hours, and average weekly and hourly earnings is completed using the standard weighted link relative methodology used for other series. BLS has been using the CES SDM for some State and metropolitan area employment series which have small samples since 2003.

Table 1.

Industry title	CES Industry Code
Direct health and medical insurance carriers	55524114
Tax preparation services	60541213
Other technical consulting services	60541690
Remediation services	60562910
Recreational and vacation camps	70721214

The CES Small Domain Model (SDM) is a Weighted Least Squares model with two employment inputs: (1) an estimate based on available CES sample for that series, and (2) an ARIMA projection based on trend from 10 years of historical QCEW data.

Business birth and death estimation. In a dynamic economy, firms are continually opening and closing. These two occurrences offset each other to some extent. That is, firms that are born replace firms that die. CES uses this fact to account for a large proportion of the employment associated with business births. This is accomplished by excluding business death units from the matched sample definition. Effectively, business deaths are not included in the sample-based link portion of the estimate, and the implicit imputation of their previous month's employment is assumed to offset a portion of the employment associated with births.

There is an operational advantage associated with this approach as well. Most firms will not report that they have gone out of business; rather, they simply cease reporting and are excluded from the link, as are all other nonrespondents. As a result, extensive follow-up with monthly nonrespondents to determine whether a company is out-of-business or simply did not respond is not required.

Employment associated with business births will not exactly equal that associated with business deaths. The amount by which it differs varies by month and by industry. As a result, the residual component of the birth/death offset must be accounted for by using a model-based approach.

With any model-based approach, it is desirable to have 5 or more years of history to use in developing the models. Due to the absence of reliable counts of monthly business births and deaths, development of an appropriate birth/death residual series assumed the following form:

Birth-death residual = Population - Sample-based estimate + Error

During the net birth/death modeling process simulated monthly probability estimates over a 5-year period are created and compared with population employment levels. Moving from a simulated benchmark, the differences between the series across time represent a cumulative birth/death component. Those residuals are converted to month-to-month differences and used as input series to the modeling process.

Models are fit using X-12 ARIMA (Auto-Regressive Integrated Moving Average). Outliers, level shifts, and temporary ramps are automatically identified. Five models are tested, and the model exhibiting the lowest average forecast error is selected for each series. Table 2-B shows the net birth/death model figures for the post-benchmark period of April 2007 to October 2007.

Residential and Nonresidential Specialty Trade Contractors estimates 

Residential and nonresidential specialty trade contractors estimates in Specialty Trade Contractors (NAICS 238) are produced as breakouts under the standard NAICS coding structure. Benchmarks for these series are developed from the QCEW data and independent estimates for these series are made on a monthly basis and raked to the estimates produced under the standard structure to ensure that the sum of the residential specialty trade contractors and non-residential specialty trade contractors series is consistent with the published total for specialty trade contractors at the 3-digit NAICS level. 

The raking adjustment follows the following methodology: 

Estimates are derived independently for the residential and nonresidential groups at the 4-digit NAICS level for each region. The regional estimates are rounded and summed to the 4-digit NAICS level for both the residential and non-residential groups. Within each 4-digit NAICS series, ratios of residential-to-total employment and nonresidential-to-total employment are calculated. 

At the 4-digit NAICS level, the sum of the residential/nonresidential series is subtracted from the official industry-region cell structure total to determine the amount that must be raked. The total amount that must be raked is multiplied by the ratios to determine what percentage of the raked amount should be applied to the residential group and what percentage should be applied to the nonresidential group. 

Once the residential and nonresidential groups receive their proportional amount of raked employment, the two groups are aggregated again to the 4-digit NAICS level. At this point they are equal to the 4-digit NAICS total derived from the official industry-region cell structure. This raking process also forces additivity at the 3-digit NAICS level. 

No estimates of Hours and Earnings are made for the residential and nonresidential series.

 

Last Modified Date: February 1, 2008