MEMPHIS, Tenn. — Based on calculation by the Federal Reserve Bank of St. Louis, newly revised estimates for the Memphis metro area indicate that employment growth in the Memphis metro area was 13.7 thousand (2.2 percent) in 2005 and 9.3 thousand (1.5 percent) in 2006. Pre-revision estimates of employment growth for 2005 and 2006 were 11.5 thousand (1.8 percent) and 6.1 thousand (1.0 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 Memphis MSA encompasses Fayette, Shelby and Tipton counties in Tennessee; Crittendon County in Arkansas; and DeSoto, Marshall, Tate and Tunica counties in Mississippi.
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.
Memphis Employment Over Time and Across Industries
The charts below show total employment and its growth rate for the Memphis metro area from 1999 through 2006. For the period covered by the benchmark revisions, the effects on the level of employment are uniformly positive: By the end of 2006 the revised data show 5.4 thousand more jobs than were previously estimated. Some fluctuations in quarter-to-quarter revisions result in a pattern where some quarters show higher growth and some show lower growth. Most of the net increase in job growth over the revision period is concentrated during mid-2005 and at the end of 2006.
The table below shows the breakdown of employment changes by major sector. In both 2005 and 2006, the upward revisions to the data are broad-based:
In 2005, the only downward revisions were to Information Services, Financial Activities, and Government. Fairly large upward revisions were evident in nearly every other sector. In 2006, there were slight downward revisions to Trade, Transportation, and Utilities; Education and Health Services; and Government services. These were more than offset by higher estimates for several categories, including Professional and Business Services. Two of the weakest sectors for 2006Manufacturing and Financial Activitieswere revised from initial estimates of declining jobs to no net change.
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 Memphis 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, our view of the economy can change dramatically following benchmark revisions," said Pakko and Wall. "For example, during the recession year of 2001 it was initially estimated that employment declined by 6,100 jobs. This figure was revised one year later to show a decline of only 1,400 jobsonly to be revised one more time to show more than double the job loss that was initially reported. Employment in 2003, on the other hand, looked initially to have fallen slightly, but subsequent revisions turned the year into a rather robust one. 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.
# # #