[Federal Register Volume 70, Number 15 (Tuesday, January 25, 2005)]
[Notices]
[Pages 3564-3565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-1336]


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DEPARTMENT OF LABOR

Bureau of Labor Statistics


Notice of Decision To Revise Method for Estimation of Monthly 
Labor Force Statistics for Certain Subnational Areas

AGENCY: Bureau of Labor Statistics, Labor.

ACTION: Statement of policy.

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SUMMARY: The Department of Labor, through the Bureau of Labor 
Statistics (BLS), is responsible for the development and publication of 
local area labor force statistics. In the Local Area Unemployment 
Statistics (LAUS) program, monthly estimates of the labor force, 
employment, unemployment, and the unemployment rate for more than 7,000 
areas in the Nation are developed and issued monthly. With data for 
January 2005, to be published in March 2005, the monthly labor force 
estimates prepared in the LAUS program will be based on methodological 
improvements that resulted from the completion of a number of projects 
to improve the statistical basis of the estimates. In addition, the 
LAUS estimates will reflect updated geography and other techniques that 
are based on 2000 Census data.

EFFECTIVE DATE: These changes will be effective with January 2005 LAUS 
estimates issued in March 2005.

FOR FURTHER INFORMATION CONTACT: Sharon P. Brown, Chief, Division of 
Local Area Unemployment Statistics, Bureau of Labor Statistics, 
Telephone 202-691-6390.

SUPPLEMENTARY INFORMATION:

I. Summary of Comments

    The BLS received one comment in response to the request for 
comments on the Proposal to Revise the Method for Estimation of Monthly 
Labor Force Statistics for Certain Subnational Areas. That commenter 
was opposed to the use of model based estimation for the Miami 
metropolitan division. In BLS's judgment the statistical modeling

[[Page 3565]]

methodology is superior to the existing method for Miami because it 
directly utilizes Current Population Survey (CPS) estimates of 
employment and unemployment, allows for the development of seasonally 
adjusted estimates, and provides measures of error on the data. The 
commenter also opposed the implementation of a method for adjusting 
place-of-work employment to place-of-residence using decennial census-
based ratios for areas outside the area of estimation with known 
commutation. Based on research and simulations, the BLS feels that this 
dynamic approach will result in better estimation of resident employed 
in the intercensal period.

II. Additional Information

    Since the BLS was given responsibility for the LAUS program in 
1972, a hierarchy of estimation methods has been used to produce the 
State and area labor force estimates, based in large part on the 
availability and quality of data from the CPS, the official measure of 
the labor force for the nation. The BLS has continuously advanced the 
statistical basis of the LAUS estimates by researching and implementing 
improved statistically sound methodology, updating the methodology with 
decennial census data, and reflecting the latest decennial 
identification of geographic areas.
    Estimates for States, the District of Columbia, New York City, Los 
Angles-Long Beach-Glendale Metropolitan Division. From 1996 on, the 
estimates for States, the District of Columbia, New York City, Los 
Angeles metropolitan area, and the balances of New York State and 
California were developed using signal-plus-noise models. These models 
relied heavily on monthly CPS data, as well as current wage and salary 
employment estimates and unemployment insurance statistics. The State 
CPS annual averages of employment and unemployment were used as 
benchmarks to the model-based estimates at the end of the year. In 
general, this method of model estimation and annual benchmarking 
resulted in an overestimate of employment and an underestimate of 
unemployment and the unemployment rate in States as compared to the 
national CPS estimates. The annual benchmarking approach reintroduced 
sampling error into the series and resulted in significant end-of-year 
revisions in a large number of States, caused economic anomalies that 
were an artifact of the benchmarking approach, distorted seasonality in 
the previous year so that analysis is impaired, and often missed shocks 
to the economy.
    The improved model-based approach to estimation with real-time 
benchmarking addresses these issues. The models are signal-plus-noise 
models, where the signal is a bivariate model of the employment or 
unemployment level. Seasonal adjustment occurs within the model 
structure. Real-time benchmarking ensures that State estimates add to 
the national estimates of employment and unemployment each month. (The 
benchmark changes from annual State-level estimates of employment and 
unemployment to monthly national estimates of these measures.) In this 
way, economic shocks will be reflected in the State estimates on a 
real-time basis, and end-of-year revisions will be significantly 
smaller. The models with real-time benchmarking produce reliability 
measures for the seasonally adjusted and not seasonally adjusted 
series, and on over-the-month and over-the-year change.
    Model-based Estimation in Six Additional Areas. Model-based 
estimation is extended to the following areas and the respective 
balance-of-State areas: Chicago metropolitan division, Cleveland 
metropolitan area, Detroit metropolitan area, Miami metropolitan 
division, New Orleans metropolitan area, and Seattle-Everett 
metropolitan division. This improves the statistical basis of the 
estimation for these areas, and provides important tools for analysis 
such as measures of error and seasonally adjusted series.
    These area models are univariate and are benchmarked to the State 
employment and unemployment estimates on a real-time basis. As with the 
State models, seasonally adjusted series are produced, along with 
measures of error for the seasonally adjusted and not seasonally 
adjusted series, and on over-the-month and over-the-year change.
    New and Reentrant Unemployment. Long-standing concerns were 
expressed in the regard to the estimation of unemployment at the 
substate level (for areas other than New York City, Los Angeles, and 
the balances of New York State and California). Difficulty in the 
measurement of unemployed new and reentrants to the labor market led to 
the use of large proportionate adjustment of area estimates to the 
State total unemployed as a way of controlling for the underestimate at 
the area level. The improved method addresses the issue of 
underestimation and eliminates the need for significant proportionate 
adjustment of area estimates to the monthly State levels of 
unemployment.
    The new methodology incorporates the CPS new and reentrants State 
data and utilizes improved econometric modeling techniques. In this 
model, the values of the coefficients change from month to month as the 
models are updated with information from current observations. The 
model estimates are distributed to each labor market area in the State 
based on the area's share of the State population. New entrants are 
distributed based on the area's share of the State 16-19 year old 
population, and reentrants are distributed based on the area's share of 
the State 20 years and older population.
    Residency Adjustment. The underlying concepts and definitions of 
all labor force data developed by the LAUS program are consistent with 
those of the CPS, including the requirement that measures relate to the 
place of residence of the labor force participant. Current, 
geographically comprehensive employment data at the area level are 
establishment-based and reflect jobs by place of work. Thus, these data 
must be adjusted to account for multiple-job holding and residency 
prior to use in the LAUS program. The prior Census-based residency 
adjustment procedure used a single ratio for the labor market area. 
Thus, it was the limited in the geographic scope for influencing the 
area's estimate of resident employed and static in nature. Also, labor 
market areas often are not defined to the point where commutation is 
zero, and, in the intercensal period, job growth can and does occur in 
the areas surrounding the estimating area.
    In the new method, resident employment in an area is a function not 
only of the relationship between employed residents and jobs in that 
area, but in other areas within commuting distance. The procedure is 
more dynamic than the prior method insofar as job count changes in 
commuting areas can affect resident employment. As in the current 
procedure, however, the commuting ratios themselves are fixed for the 
intercensal period.
    Detailed descriptions of the current and redesign approaches are 
available at the above address and at the BLS LAUS Web site http://www.bls.gov/lau/home.htm.

    Signed in Washington, DC, this 14th day of January, 2005.
John M. Galvin,
Associate Commissioner, Office of Employment and Unemployment 
Statistics, Bureau of Labor Statistics.
[FR Doc. 05-1336 Filed 1-24-05; 8:45 am]
BILLING CODE 4510-24-P