LITTLE ROCK, Ark. — Based on calculations by the Federal Reserve Bank of St. Louis, newly revised estimates indicate that employment growth in the Fayetteville-Springdale-Rogers metro area was 10.2 thousand (5.3 percent) in 2005 and 4.0 thousand (2.0 percent) in 2006. Pre-revision estimates of employment growth for 2005 and 2006 were 9.4 thousand (4.8 percent) and 5.5 thousand (2.7 percent), respectively. By comparison, according to the latest estimates for the United States over the same periods, payroll employment grew by 1.9 percent in 2005 and 1.7 percent in 2006.
The net effect of these revisionsslightly upward for 2005 and slightly downward for 2006was to lower the December 2006 estimate of jobs for the metro area from 208.8 thousand to 208.1 thousand. The metro area encompasses Benton, Madison and Washington counties in Arkansas; and McDonald County in Missouri.
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 further back in time.
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 needs 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."
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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