!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Measures of Employment and Unemployment

Sunday, February 28, 2010

Measures of Employment and Unemployment

With so much attention and policy discussion nowadays understandably focused on high unemployment, it's important to have a reasonably clear idea of how overall employment and unemployment are measured.

In the US, producing the relevant data is the job of the Bureau of Labor Statistics (BLS), which conducts two surveys each month:The January 2010 issue of the Economic Letter published by the Federal Reserve Bank of Dallas reproduces a BLS chart comparing the two:

Universe surveyed
CPS: Civilian noninstitutional population age 16 and older.
CES: Nonfarm wage and salary jobs.

Type of survey
CPS: Monthly sample survey of approximately 60,000 households.
CES: Monthly sample survey of approximately 150,000 businesses and government agencies covering 390,000 establishments.

Major outputs
CPS: Measures labor force, employment and unemployment with significant demographic detail.
CES: Measures employment, hours and earnings with significant industrial and geographic detail.

Reference period
CPS: Calendar week that includes the 12th of the month.
CES: Employer pay period that includes the 12th of the month.

Employment concept
CPS: Estimates the number of employed persons.
  • Counts multiple jobholders once.

  • Includes individuals absent from work without pay.
CES: Estimates the number of nonfarm payroll jobs.
  • Counts multiple jobholders for each payroll job.

  • Includes only those receiving pay for the reference period.
Employment definition differences
CPS: Includes unincorporated self-employed persons, agriculture and related workers, private household workers, unpaid family workers (persons working without formal pay in their family’s business) and workers on leave without pay.
CES: Excludes all the groups listed above, except for the logging component of agriculture and related industries.

Benchmark adjustments
CES: No direct benchmark for employment; adjustments to underlying population base revised annually to intercensal estimates and every 10 years to the decennial census.
CES: Employment benchmarked annually to employment counts derived primarily from unemployment insurance tax records.

As the accompanying article explains,
Both surveys have their strengths and weaknesses. The CPS provides a broader picture of nonfarm employment because it includes the unincorporated self-employed, unpaid family workers, private household employees and workers absent without pay. It may even partly capture off-the-books employment not reported in the CES. However, the CPS employment classification is based on interviewees’ descriptions of their jobs and doesn’t always agree with employers’ reporting in the CES ...

Analysts often view the CES as a better gauge of cyclical movements in employment by sector because of its higher sampling ratio. However, it’s subject to double counting because it may include persons with more than one job or those who change jobs in a given payroll period.
Because the CPS and the CES often diverge to a marked degree, the BLS also publishes an adjusted CPS that brings its definition of employment into closer alignment with that of the CES. Discrepencies between the two remain,
mainly related to differences in definition, size and concept of the two surveys. These differences range from sampling errors and benchmark revisions to off-the-books employment, the birth of new firms and varying job-to-job movements.
By taking the trouble to learn the basic differences between the CPS and the CES, you equip yourself to make sense of such seemingly contradictory data as those in the opening sentence of the BLS Employment Situation News Release of February 5: "The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today."