ST. LOUIS — Based on calculations by the Federal Reserve Bank of St. Louis, newly revised estimates for the St. Louis metro area indicate that employment growth in the region was 12.1 thousand (0.9 percent) in 2005 and 13.6 thousand (1.0 percent) in 2006. Pre-revision estimates of employment growth for 2005 and 2006 were 15.7 thousand (1.2 percent) and -0.4 thousand (-0.03 percent), respectively.
By comparison, the latest estimates for the United States as a whole over the same period, payroll employment grew by 1.9 percent in 2005 and 1.7 percent in 2006.
The St. Louis MSA includes all or parts of the following counties: St. Louis City and Crawford (part), Franklin, Jefferson, Lincoln, St. Charles, St. Louis, Warren and Washington Counties; and Bond, Calhoun, Clinton, Jersey, Macoupin, Madison, Monroe and St. Clair counties in Illinois.
These calculations, by St. Louis Fed economists Michael R. Pakko and Howard J. Wall, were done in response to annual benchmark revisions, released Thursday by the Bureau of Labor Statistics (BLS), for payroll employment data for every metro area in the United States. Monthly employment estimates going back to April 2005 were affected by these revisions. In addition, new population controls resulted in small revisions to the data that go further back in time.
St. Louis Employment Over Time and Across Industries
The charts below show total employment and its growth rate for the St. Louis metro area from 1999 through 2006. The first chart shows that the post-benchmark estimates of the levels of employment are lower for all of 2005 and higher for 2006 than the pre-benchmark estimates. Also, the sharp downward turn in employment at the end of 2006 has been replaced with a moderate increase. The second chart, which presents quarterly growth rates, shows that 2006 now looks better throughout the year and that growth at the end of the year was about average for the post-2003 period.
The table below breaks down the pre- and post-revision employment estimates by major industry:
For 2005, the bulk of the downward revision was due to decreased estimates of employment in manufacturing; trade, transportation, and utilities; and financial activities. The upward revisions for 2006 were more across the board, with especially large revisions for professional and business services and education and health services. These two industries were by far the largest contributors to the overall increase in employment in 2006, together accounting for about 70 percent of the total.
Background: Jobs Data and Benchmarking
At any time, the most up-to-date estimates of payroll employment in a metro areathe number of jobsis provided by the Current Employment Statistics (CES) program of the BLS. According to the BLS, each month it surveys about 160,000 businesses and government agencies, representing approximately 400,000 individual worksites, from around the United States. Although the survey covers hundreds of thousands of employers, these employers make up only a small percentage of all businesses and worksites in the country. (According to the BLS, there were more than 8.8 million such establishments in the United States in June 2006.)
To calculate a comprehensive measure of metro area employment, the BLS has to estimate the number of establishments in the area. "This," said Pakko and Wall, "is the primary reason for the sometimes-large revisions to the CES data: the difficulty in estimating the number of establishments. When the economy is in recovery, for example, new firms might be setting up and hiring workers very quickly. The BLS doesn't find out about the new firms or jobs until the unemployment insurance records are updated, which can take several months or more. This lag is compounded by the fact that small firms, which provide the bulk of jobs, might only need to provide unemployment insurance information once a year rather than monthly or quarterly, as is required of larger firms."
To estimate the number of establishments, the BLS relies on the Quarterly Census of Employment and Wages (QCEW). The QCEW is a tabulation of employment information for workers covered by state and federal unemployment insurance programs. Because of its comprehensive nature, data from the QCEW cannot be produced as quickly as data from the CES: Initial data are released 6 to 7 months after the end of a quarter and are subject to subsequent revision. To fill in the blanks, the BLS estimates the number of establishments using the QCEW as a benchmark. Each year, the BLS establishes new benchmarks using updated data from the QCEW. Because of the lags and revisions to the QCEW data, the yearly benchmarking affects employment data from the CES going back 21 months.
"This is why the estimates just released have affected the yearly employment changes for 2005 and 2006," said Pakko and Wall. "Note also that the estimates for job growth in 2006 will change again in March 2008 because much of the data for 2006 will be affected by the benchmark revisions that will occur then."
The following table provides the history of recent revisions to the yearly employment changes for the St. Louis metro area:
The first column of data is based on the first estimates of December employment, which are released in the subsequent January. The second data column is the estimate after the first benchmark revision, which happens in the subsequent March, and the last column is the estimate after the second benchmark revision, which occurs in March of the following year.
"As these numbers make clear," said Pakko and Wall, "our view of the economy can change dramatically following benchmark revisions. For example, 2001 and 2002 looked initially like much worse years than they did by the time the second benchmark revisions were done. For each year the estimated number of jobs lost fell by about 40 percent between the initial release and the second benchmark revision. Employment in 2003, on the other hand, looked initially to have fallen slightly, but subsequent revisions turned the year into a rather robust one. Revisions can go the other way also: 2004 looked at first to have been an extremely good year, but turned out subsequently to have been a more or less average one."
With branches in Little Rock, Louisville and Memphis, the Federal Reserve Bank of St. Louis serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. The St. Louis Fed is one of 12 regional Reserve banks that, along with the Board of Governors in Washington, D.C., comprise the Federal Reserve System. As the nation's central bank, the Federal Reserve System formulates U.S. monetary policy, regulates state-chartered member banks and bank holding companies, and provides payment services to financial institutions and the U.S. government.
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