Annual measures of gross job gains and gross job losses: as a complement to the quarterly gross job flow statistics, annual gross job gains and losses statistics reveal the tremendous amount of churning that underlies the net growth of employment

Monthly Labor Review, Nov, 2004 by Joshua C. Pinkston, James R. Spletzer

Annual gross job gains and losses statistics add to the labor market information currently available from BLS. A traditional measure of net employment change shows that employment fell by 2,751,038 jobs during the year measured from March 2001 to March 2002. The annual gross job gains and losses statistics indicate that this net employment loss is the result of 8,752,075 jobs added at 1,633,498 expanding establishments, 5,201,011 jobs added at 790,237 opening establishments, 11,148,760 jobs lost at 1,735,071 contracting establishments, and 5,555,364 jobs lost at 785,786 closing establishments. These annual statistics from the Business Employment Dynamics data show the tremendous amount of churning of jobs and establishments underlying the annual net employment growth.

Annual statistics: uses and interpretations

To show how the annual statistics relate to the quarterly statistics and the value added of the annual statistics relative to the quarterly statistics, the following subsection directly compares the annual and the quarterly statistics without attempting to standardize the two to the same frequency of measurement. The second subsection "annualizes" the quarterly statistics prior to comparison, and the third section carefully examines the relationship between quarterly and annual openings.

A simple comparison of annual statistics and quarterly statistics. The annual gross job flow statistics are higher in magnitude than the gross job flow statistics from any quarter within the year. For example, in table 2, for the March 2001 to March 2002 period, the annual gross job gains rate is 13.02 percent, and the annual gross job loss rate is 15.58 percent. These annual statistics are higher than any of the quarterly statistics within the year: the average quarterly gross job gains rate for the four quarters between March 2001 and March 2002 is 7.37 percent, and the average quarterly gross job loss rate is 8.01 percent.

Additional analysis of the data in tables 1 and 2 reveals that the larger annual statistics correspond to a greater importance of establishment openings and closings. That is, 22.5 percent of quarterly gross job gains are due to establishment openings, whereas 37.3 percent of annual gross job gains are due to establishment openings. Similar computations show that 20.9 percent of quarterly gross job losses are due to establishment closings, whereas 33.2 percent of annual gross job losses are due to establishment closings.

This greater importance of openings and closings in the annual statistics, relative to the quarterly statistics, is due in part to an increased number of establishment openings and closings. Using data from March 2001 to March 2002, the rate of establishment openings increases from 5.41 percent on an average quarterly basis to 12.67 percent on an annual basis, and the rate of establishment closings increases from 5.41 percent on an average quarterly basis to 12.60 percent on an annual basis. (See table 4.) This striking difference does not exist between the quarterly and annual rates of expansions and contractions: the average quarterly expansion rate is 22.94 percent, relative to an annual expansion rate of 26.20 percent, and the average quarterly and the annual contraction rates are 24.04 percent and 27.83 percent, respectively.