[Federal Register Volume 74, Number 223 (Friday, November 20, 2009)]
[Notices]
[Pages 60298-60299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-27930]


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DEPARTMENT OF LABOR

Bureau of Labor Statistics


Solicitation of Comments on a Proposal To Revise Method for 
Estimation of Monthly Labor Force Statistics for Certain Subnational 
Areas

AGENCY: Bureau of Labor Statistics, Labor.

ACTION: Notice of solicitation of comments.

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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. This program includes the issuance 
of monthly estimates of the labor force, employment, unemployment, and 
the unemployment rate for each State and labor market area in the 
nation. A hierarchy of estimation methods is used to produce the 7,300 
estimates covered by the Local Area Unemployment Statistics (LAUS) 
program (http://thomas.loc.gov/bss/d111/d111laws.html), based on the 
availability and quality of data from the Current Population Survey 
(CPS). The strongest estimating method--signal-plus-noise models with 
real-time benchmarking for current estimation and historical 
benchmarking--is employed for all States and the District of Columbia, 
the Los Angeles-Long Beach-Glendale, CA metropolitan division, New York 
City, and the respective balances of New York and California. Models 
are also employed for five additional substate areas and their State 
balances. The areas are: the Chicago-Naperville-Joliet, IL metropolitan 
division; the Cleveland-Elyria-Mentor, OH metropolitan area; the 
Detroit-Warren-Livonia, MI metropolitan area; the Miami-Miami Beach-
Kendall, FL metropolitan division; and the Seattle-Bellevue-Everett, WA 
metropolitan division.
    As part of a program of continuing improvements in LAUS 
methodology, BLS is proposing the implementation of smoothed-
seasonally-adjusted series for current and historical estimates. This 
approach is an innovative alternative to an annual historical benchmark 
for seasonally-adjusted State estimates that will address longstanding 
issues related to end-of-year revision, and also will enhance the 
analytical capability of the estimates.
    BLS proposes to implement the revised methodology beginning with 
January 2010 current estimates, with historical estimates revised to 
1976 for States, the District of Columbia, Los Angeles, New York City, 
and the respective balances of California and New York. The five other 
substate model estimates will be revised back to 1983.

DATES: Submit written comments on or before December 21, 2009.

ADDRESSES: Send comments to Sharon Brown, Division Chief, Division of 
Local Area Unemployment Statistics, Bureau of Labor Statistics, Room 
4675, 2 Massachusetts Avenue, NE., Washington, DC 20212, by FAX at 202-
691-6459, or by e-mail at [email protected].

FOR FURTHER INFORMATION CONTACT: Sharon Brown, Division Chief, Division 
of Local Area Unemployment Statistics, Bureau of Labor Statistics, Room 
4675, 2 Massachusetts Avenue, NE., Washington DC 20212, by telephone at 
202-691-6390, or by e-mail at [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    The Department of Labor, through the BLS, has been responsible for 
the development and publication of local area labor force statistics 
since 1972. In 1978, the BLS broadened the use data from the CPS in the 
LAUS program by extending the annual reliability criterion to monthly 
data. Monthly CPS levels were used directly for the 10 largest States, 
two substate areas (New York City, Los Angeles), and the respective 
balances of New York and California. In 1985, the sample redesign

[[Page 60299]]

and other efficiencies improved the reliability of CPS data at the 
State level, resulting in the current criterion on monthly and annual 
average data of an 8 percent coefficient of variation on the level of 
unemployment when the unemployment rate is 6 percent. In addition, 
North Carolina joined the group of direct-use States. In 1989, variable 
coefficient time-series models for monthly estimation of State 
employment and unemployment were introduced for 39 States and the 
District of Columbia. Further improvement was effected with the 
implementation of signal-plus-noise models in 1994. These models rely 
heavily on monthly CPS data, as well as current wage and salary 
employment and unemployment insurance statistics. State labor force 
estimation for the direct-use States was based the time series modeling 
approach beginning in January 1996.
    Improvements introduced with the redesign in January 2005 ensured 
that State estimates add to the national estimates of employment and 
unemployment each month, through real-time benchmarking. In doing so, 
the benchmark changed from annual State-level estimates of employment 
and unemployment to monthly national estimates of these measures. In 
this way, economic shocks are reflected in the State estimates on a 
real-time basis, and end-of-year revisions are significantly smaller.
    Historical benchmarking is part of the annual processing activities 
performed on the models. The first two steps, revision of inputs and 
model re-estimation, are the same for both the not-seasonally-adjusted 
(NSA) series and the seasonally-adjusted series. The final step, 
benchmarking to historical control totals, differs by series. The NSA 
estimates are benchmarked to monthly Division model controls which have 
been controlled to monthly national CPS estimates. This ensures that 
the monthly State NSA estimates sum to the national CPS estimates. The 
annual average of the NSA estimates is used to control the monthly 
seasonally-adjusted model estimates. This process preserves the 
underlying smoothness in the model estimates that would be lost by 
applying the monthly benchmarking procedure.
    However, the current procedure had an unanticipated impact on the 
historical benchmarking for the seasonally-adjusted estimates during 
2008. Unemployment rose steeply in the nation and all States during 
2008. The benchmark methodology that required the use of the annual 
average as the historical control total for the seasonally-adjusted 
estimates meant that unemployment rates were adjusted downward during 
the latter months of 2008. This impacted comparisons with January 2009 
unemployment estimates that continued to reflect the steep economic 
decline. In addition to issues with historical benchmarking, the 
monthly real-time benchmarking procedure introduces volatility into the 
current seasonally-adjusted estimates, producing estimates with 
spurious turning points that are difficult to explain to data users.

II. Current Action

    To address these serious issues, the BLS proposes modifying the 
procedures for the seasonally-adjusted estimates and implementing a 
smoothing methodology for both current and historical seasonally-
adjusted series. Smoothing the current series will reduce the number of 
spurious turning points in the estimates. For historical estimates, the 
first two steps in annual processing: revising model inputs and re-
estimating the series, are unchanged. The last step, benchmarking to 
control totals, will be revised for the seasonally-adjusted estimates. 
The use of the annual average of the NSA series as the control total 
will be dropped. Instead, as in current monthly estimation, the 
historical seasonally-adjusted series will be adjusted by the same pro-
rata factor used in adjusting the NSA estimates to the national control 
totals. Since the pro-rata factors fluctuate from month-to-month, this 
procedure will introduce additional variability into the historical 
series, which could dominate the monthly change in the benchmarked 
series. Smoothing the series following the application of the pro-rata 
adjustment will reduce the volatility added. The smoother selected is 
the Henderson Trend Filter (H13).
    Detailed descriptions of the current and proposed approaches are 
available from the office listed above.

III. Desired Focus of Comments

    Comments and recommendations are requested from the public on the 
use of the Henderson Trend Filter (H13) to smooth the LAUS current and 
historical seasonally adjusted estimates.

    Signed at Washington, DC, this 17th day of November 2009.
Kimberley Hill,
Acting Chief, Division of Management Systems, Bureau of Labor 
Statistics.
[FR Doc. E9-27930 Filed 11-19-09; 8:45 am]
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