LITTLE ROCK, Ark.Based on calculations by the Federal Reserve Bank of St. Louis, newly revised estimates for the Little Rock-North Little Rock metro area released Thursday indicate that employment growth in the area was 5.7 thousand (1.7 percent) in 2005 and 6.8 thousand (2.0 percent) in 2006. Pre-revision estimates of employment growth for 2005 and 2006 were 5.9 thousand (1.8 percent) and 5.9 thousand (1.7 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 Little Rock-North Little Rock MSA encompasses Faulkner, Grant, Lonoke, Perry, Pulaski and Saline counties.
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.
Little Rock-North Little Rock Employment Over Time and Across Industries
The charts below show total employment and its growth rate for the Little Rock-North Little Rock metro area from 1999 through 2006. The benchmark revisions lowered estimated employment during 2005 and raised it slightly toward the end of 2006. The net effect was to increase the figure for total employment in the Little Rock-North Little Rock metro area by approximately 700 jobs at the end of 2006.
The table below shows the breakdown of employment changes by major sector. Nearly every category was affected for both years, but some of the larger changes were as follows: Two categories were subject to relatively large revisions. For both the Education and Health Services and Government sectors, there were large downward revisions in 2005 and upward revisions in 2006. Revisions to professional and Business Services, and Leisure and Hospitality, moved in the other directionup in 2005 and down in 2006. Employment in the Trade, Transportation and Utilities sector was revised downward in both years.
Background: Jobs Data and Benchmarking
At any time, the most up-to-date estimates of payroll employment in a metro area the number of jobs is 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."
The following table provides the history of recent revisions to the yearly employment changes for the Little Rock-North Little Rock 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, in 2001, 2002 and 2003 the data initially showed sharp declines in employment, while subsequent data revisions reversed these declines. In 2003, the second benchmark revision raised job growth by over 13,000 jobs relative to the initial data release. Compared to some of the changes in previous years, this years benchmark revisions had relatively small net effects."
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.
# # #