CES Net Birth/Death Model

• In 2007, the CES sample includes about 150,000 businesses and government agencies drawn from a sampling frame of Unemployment Insurance tax accounts which cover approximately 390,000 individual worksites. The active CES sample includes approximately one-third of all nonfarm payroll workers. The sample-based estimates are adjusted each month by a statistical model designed to reduce a primary source of non-sampling error, which is the inability of the sample to capture, on a timely basis, employment growth generated by new business formations.  
• There is an unavoidable lag between an establishment opening for business and its appearing on the sample frame and being available for sampling. Because new firm births generate a portion of employment growth each month, non-sampling methods must be used to estimate this growth.  
• Earlier research indicated that while both the business birth and death portions of total employment are generally significant, the net contribution is relatively small and stable. To account for this net birth/death portion of total employment, BLS uses an estimation procedure with two components: the first component excludes employment losses from business deaths from sample-based estimation in order to offset the missing employment gains from business births. This is incorporated into the sample-based estimate procedure by simply not reflecting sample units going out of business, but imputing to them the same trend as the other firms in the sample.  This step accounts for most of the net birth/death employment.
• The second component is an ARIMA time series model designed to estimate the residual net birth/death employment not accounted for by the imputation. The historical time series used to create and test the ARIMA model was derived from the UI universe micro level database, and reflects the actual residual net of births and deaths over the past five years.   
• The net birth/death model component figures are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources in the CES estimates such as sampling error or design limitations.  
• Note that the net birth/death figures are not seasonally adjusted, and are applied to the not seasonally adjusted monthly employment estimates to derive the final CES employment estimates. 

The table below shows the net birth/death model adjustment used in the published CES estimates since the establishment of the most recent benchmark level for March 2007.

(p) - preliminary

Additional information on the CES Birth/Death Model is available under Frequently Asked Questions.

Historical Birth/Death factors are available at www.bls.gov/ces/cesbdhst.htm.

An overview of the CES birth/death model, including a detailed description of the methodology is available at www.bls.gov/opub/mlr/2006/05/art4full.pdf.

Technical information on the estimation methods used to account for employment in business births and deaths is available at www.bls.gov/ces/cesbdtech.htm.

Last Modified Date: September 5, 2008