Why size class methodology matters in analyses of net and gross job flows: net and gross job flow statistics by size class are produced with data from the Business Employment Dynamics program; alternative methodologies for defining size classes yield sharply different pictures of employment growth

Monthly Labor Review, July, 2004 by Cordelia Okolie

Notes

(1) One other issue that has been raised in the gross job flows literature is the definition of a small business. This article presents its statistics using BLS standard size class categories. Users can then aggregate categories in the manner they wish to for various definitions of the term small business.

(2) For more information on regression-to-the-mean bias, see Steven J. Davis, John C. Haltiwanger, and Scott Schuh, Job Creation and Destruction (Cambridge, MA, MIT Press, 1996), especially chapter 4; and Milton Friedman, "Do Old Fallacies Ever Die?" Journal of Economic Literature, December 1992, pp. 2129-32.

(3) For more information about the Business Employment Dynamics program, see James R. Spletzer, R. Jason Faberman, Akbar Sadeghi, David M. Talan, and Richard L. Clayton, "Business Employment Dynamics," Monthly Labor Review, April 2004, pp. 29-42. The Business Employment Dynamics program website is www.bls.gov/bdm.> (4) A technical point warrants mention. Establishment births in June 2000 are not in the database in March 2000, and establishment deaths are not in the database in June 2000. Thus, base-size employment is defined for openings as of June 2000, and end-size employment is defined for closings as of March 2000. To calculate the mean size of openings and closings, employment in the quarter in which the unit was not present was set to zero.

(5) This finding of monotonically declining (not seasonally adjusted) net employment growth rates does not hold for the other quarters in calendar-year 2000.

(6) For further analysis and discussion of this topic, see Spletzer and others, "Business Employment Dynamics."

Cordelia Okolie is an economist in the Office of Employment and Unemployment Statistics, Bureau of Labor Statistics, Washington, DC. Email: Okolie_C@bls.gov