Business employment dynamics: new data on gross job gains and losses: the new BLS business employment dynamics data series captures establishment-level employment changes that are absent from other BLS series; the detail provided gives researchers insight into business openings, closings, expansions, and contractions across the stages of the business cycle

Monthly Labor Review, April, 2004 by James R. Spletzer, R. Jason Faberman, Akbar Sadeghi, David M. Talan, Richard L. Clayton

One of the most watched economic indicators in the United States is the monthly change in nonfarm payroll employment released by the Bureau of Labor Statistics. Changes in this indicator can affect stock market movements and interest rate decisions considerably. The monthly change in nonfarm payroll employment gives the net change in the number of jobs over a particular month--the overall change, given that some establishments have opened, some have expanded, some have contracted, and some have closed. This article presents new BLS data on quarterly gross job gains and losses, documents their magnitude, and examines the historical time series having to do with these statistics from 1992 to 2003.

The new BLS measures of gross job gains and gross job losses afford a more thorough understanding of the employment decisions of the millions of business establishments in the U.S. economy. Examining establishment-level employment changes aids in analyzing both the large gross job flows that underlie the substantially smaller net employment changes and the establishment-level employment dynamics across various stages of the business cycle.

The article begins with definitions of gross job gains and gross job losses. Following this introductory section are a description of the source data used by the Bureau to generate estimates of quarterly gross job gains and gross job losses and an explanation of the methodology employed for longitudinally linking establishment records. The heart of the article is the presentation of the new BLS business employment dynamics data series, together with an analysis of the levels and movements of gross job gains and gross job losses during the past 10 years. Special attention is given to technical issues such as the seasonal adjustment of gross job gains and gross job losses, how the business employment dynamics data compare with other BLS establishment-based employment series, and establishment openings and closings relative to births and deaths. The article concludes with a summary of ongoing work and planned future enhancements to the gross job gains and gross job loss statistics at the Bureau.

Concepts and definitions

The net result of the millions of business establishments in the U.S. economy changing their specific employment levels is a change in aggregate employment from one quarter to the next. While this aggregate net change identifies the overall growth or decline of the labor market, it does not convey the underlying heterogeneity of the many establishments that open, expand, contract, and close every quarter. By contrast, statistics on gross job gains and gross job losses aggregate the establishment-level employment changes in such a way that one can observe and assess the underlying dynamics. (1)

The Bureau uses a number of definitions pertaining to gross job gains and gross job losses. Gross job gains are the sum of all employment increases at either opening or expanding establishments. An opening establishment is an establishment that has positive employment in the current quarter and that either had zero employment or was not in the database the previous quarter. An expanding establishment is a continuous unit that increases its employment from a positive level in the previous quarter to a higher level in the current quarter. Gross job losses are the sum of all employment losses at either closing or contracting establishments. A closing establishment is an establishment that had positive employment in the previous quarter and that either has zero employment or is not in the database in the current quarter. A contracting establishment is a continuous unit that decreases its employment from the previous quarter to a lower positive level in the current quarter. The familiar net change in employment is the difference between the gross job gains and the gross job losses.

Many establishments do not change their level of employment from one quarter to the next. For example, between the first and second quarters of 2003, 3.1 million U.S. establishments with workers did not change their employment levels. Those establishments which keep their employment constant do not contribute to the count of either gross job gains or gross job losses. However, such establishments and their employment levels are included in the count of the total number of establishments and the aggregate level of employment.

By dividing estimates of gross job gains and gross job losses by the average of the current and previous quarters' employment, the Bureau expresses those estimates as rates. This approach provides a symmetric growth rate, so that one can add and subtract the rates just as one can the levels. For instance, the net growth rate is the difference of the gross job gain rate and the gross job loss rate.

An example can help clarify the concepts of gross job gains and gross job losses. For the rest of this paragraph, the data discussed are not seasonally adjusted. In March 2003 there were 105,079,625 jobs, and in June 2003 there were 107,615,979 jobs. Thus, employment increased by 2,536,354 jobs during the second quarter of 2003. This employment growth can be decomposed into expanding, opening, contracting, and closing establishments. Employment in expanding establishments grew by 7,229,797 jobs, employment in opening establishments by 1,754,671 jobs. The level of gross job gains was 8,984,468 jobs during the second quarter of 2003, a rate of 8.5 percent. Employment in contracting establishments declined by 5,093,167 jobs, and closing establishments accounted for the loss of 1,354,947 jobs. The level of gross job losses was 6,448,114 jobs during the second quarter of 2003, a rate of 6.1 percent. The difference between the gross job gains and the gross job losses constituted the net employment increase of 2,536,354 jobs, a rate of 2.4 percent.