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Chapter 4.
Measurement of Unemployment in States and Local Areas
Estimates for Sub-State Areas—The
Handbook Method
Until 1973, the Handbook method was the only means used
to develop State and local area labor force and
unemployment estimates. With the exception of the Los
Angeles-Long Beach metropolitan area and New York City,
it continues to be the method used for sub-State
estimation. It is an effort to estimate unemployment for
an area using available information, comparable to what
would be produced by a random sample of households in the
area, without the expense of a large labor force survey
like the CPS. The Handbook presents a series of
estimating "building blocks," where categories
of unemployed workers are classified by their previous
status. Two broad categories of unemployed persons are:
(1) Those who were last employed in industries covered by
State UI laws, and (2) those who either entered the labor
force for the first time or reentered after a period of
separation. Until 1996, estimates also were made for
those who were last employed in industries not covered by
State UI laws, including private household workers, the
self-employed, unpaid family workers, and segments of
agriculture, nonprofit industries, and State and local
government. These industries account for a very small
percentage of employment. In a few States, where the
agriculture component is significant and where UI
coverage of agricultural employment does not go beyond
the Federal minimum, an exception procedure was
established to allow direct estimation of agricultural
unemployment.
Unemployment. In the current month, the
estimate of unemployment is an aggregate of the estimates
for each of the two building-block categories. The
"covered" category consists of: (1) Those
who are currently collecting UI benefits, and (2) those
who have exhausted their benefits. Only the insured
unemployed are obtained directly from an actual count of
current UI claimants for the reference week under the
State UI, Federal, and Railroad programs. The estimates
of persons who have exhausted their benefits are based
upon the number actually counted in the current period,
plus an estimate of those expected still to be unemployed
from previous periods.
The "new entrants and reentrants into the labor
force" category cannot be estimated directly from UI
statistics because unemployment for these persons is not
immediately preceded by the period of employment required
to receive UI benefits. Instead, total entrants into the
labor force are estimated on the basis of the national
historical relationship of entrants to the experienced
unemployed and the experienced labor force. The Handbook
estimate of entrants into the labor force is a function
of: (1) The particular month of the year, (2) the level
of the experienced unemployed, (3) the level of the
experienced labor force, and (4) the youth proportion of
the working-age population. The estimate of total
entrants for a given month is derived from the following
equation:
ENT = A(X+E) + BX
where:
ENT = total entrant unemployment
E = total employment
X = total experienced unemployment
A, B = synthetic factors incorporating both seasonal
variations and the assumed relationship between the
proportion of youth in the working-age population and
the historical relationship of entrants to either the
experienced unemployed (B factor) or the experienced
labor force (A factor).
Employment. The total employment estimate for a
particular area may be based on data from several
sources. The principal sources include the Federal-State
CES survey for the area, a State-designed survey of
establishment, or extrapolated ES-202 employment data.
These are designed to produce estimates of the total
number of employees on payrolls in nonfarm industries for
the particular area.
The "place-of-work" employment estimates
must be adjusted to a place-of-residence basis, as in the
CPS. Estimated adjustment factors for several categories
of employment have been developed on the basis of
employment relationships which existed at the time of the
most recent decennial census. These factors are
appropriately weighted and combined into a single factor
which is then applied to the place-of-work employment
estimates for the current period to obtain adjusted wage
and salary employment estimates. Synthetically developed
estimates for employment not represented in the
establishment series—agricultural workers, nonfarm
self-employed and unpaid family workers, and private
household workers—are derived by extrapolation from
the decennial census. These components plus the wage and
salary component represent total Handbook employment.
Sub-State adjustment for consistency and additivity.
Each month, Handbook estimates are prepared for labor
market areas that exhaust each State geographically. To
obtain an estimate for a given area, a "Handbook
share" is computed for that area; this is defined as
the ratio of the area's Handbook estimate to the sum of
the Handbook estimates for all LMA's in the State. This
ratio is then multiplied by the current statewide
estimate for the State to produce the final adjusted LMA
estimate:
Ua(t) = Us(t) * UHBa(t)
/ UHBa(t)
where:
U = total unemployment
UHB = Handbook unemployment
a = area
s = State
t = time
A comparable adjustment is performed for employment.
Benchmark correction. At the end of each year,
sub-State estimates are revised to incorporate any
changes in the inputs, such as revisions in the
place-of-work-based employment estimates or claims data
and updated historical relationships. These revised area
Handbook estimates are then readjusted to sum to the
revised (benchmarked) State estimates of employment and
unemployment.
Next: Producing
Estimates for Parts of LMA's
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