Assumptions and Methods Used in Preparing Employment ProjectionsOccupational statements in the Handbook include numerical projections of the change in employment between 2008 and 2018. These projections are developed using the Bureau of Labor Statistics (BLS) employment projections model system. Projections of occupational employment are the final step in the system; these steps are listed in the discussion of methods below. A discussion of projections methods also is accessible on the Internet at http://www.bls.gov/opub/hom/homch13_a.htm. The November 2009 Monthly Labor Review presents a comprehensive discussion of the 2008-18 projections of the economy, labor force, and industry and occupation employment. The winter 2009-10 Occupational Outlook Quarterly presents the projections in a series of charts. The projections reflect the knowledge and judgment of staff in the BLS Office of Occupational Statistics and Employment Projections and of knowledgeable people from other BLS offices, other government agencies, colleges and universities, industries, unions, professional societies, and trade associations, who furnished data and information, prepared reports, or reviewed the projections. BLS takes full responsibility, however, for the projections. Assumptions. The information in the Handbook is based on an economic projection which, in turn, is based on assumptions about several key variables that affect the U.S. economy. The United States entered a severe recession in December 2007, leading to declining output and high unemployment. However, BLS expects the economy to return to its long-term trend rate of growth over the next decade. Consequently, the employment projections are based on an anticipated growth rate of 2.4 percent of Gross Domestic Product (GDP) per year from 2008 to 2018. Other key assumptions include slower growth in the labor force (0.8 percent annually from 2008 to 2018 compared with 1.1 percent annually over the past 10-year period, 1998-2008) as a large number of workers retire, and a slowdown in labor productivity (1.8 percent average annual growth compared with 2.6 percent annually over the 1998-2008 period). The projections model also assumes an unemployment rate of 5.1 percent in 2018. Growth in personal consumption expenditures, the largest single component of GDP, is expected to slow to 2.5 percent annually from 2008-18, down from the 3 percent annual average from 1998-2008. Underlying this assumption is an expected slowdown in the growth of spending on non-durable goods (defined as goods lasting less than three years) and durable goods (such as cars and large appliances). Growth in spending on consumer services is anticipated to be stronger than overall personal consumption growth, however, driven in part by continued increases in medical care spending. Residential investment (the construction of new homes and dwellings) is expected to increase 5.1 percent annually over the projections period, reflecting the severe housing slump downturn that began in 2006 and the historically low starting point. Non-residential investment, which includes purchases by firms of equipment and software as well as construction of non-residential structures, should see 3.0 percent growth per year from 2008 to 2018, similar to the 3.1 percent annual growth from 1998-2008. Underlying this assumption is an anticipated slowdown (compared to the prior decade) in non-residential structure investment. Total investment, consisting of residential plus non-residential investment, is expected to increase by 3.9 percent annually from 2008-18, reaching 15.7 percent of GDP in 2018, higher than the 14.0 percent mark of 2008. BLS expects the trade deficit to be 4.4 percent of GDP in 2018, below the 2004 peak of 5.6 percent, but still equivalent to about $650 billion. Inflation is expected to average 1.9 percent from 2008 to 2018, reflecting low levels of inflation during the initial years due to the recession, followed by a return to the long-term trend. Although BLS considers these assumptions reasonable, the economy may follow a different course, resulting in a different pattern of occupational growth. Real growth also could be different because most occupations are sensitive to a much wider variety of factors than those considered in the various projections models. Unforeseen changes in consumer, business, or government spending patterns and in the ways in which goods and services are produced as well as advances in technology could greatly alter the growth of individual occupations. Methods. This section summarizes the steps involved in BLS projections of employment by occupation. BLS uses U.S. Census Bureau projections of the population by age, gender, ethnicity, and race, combined with projections of labor force participation rates—the percent of the specified group of the population working or seeking work—to arrive at estimates of the civilian labor force for the projected year. BLS projections are developed in a series of steps, each of which is based on separate projections procedures, models, and various related assumptions. These steps, or system components, deal with:
These components provide the overall analytical framework needed to develop detailed employment projections. Each component is developed in order, with the results of each used as input for successive components and with some results feeding back into earlier steps. Each step is repeated a number of times to ensure internal consistency as assumptions and results are reviewed and revised. The projections of the labor force and assumptions about other demographic variables, fiscal and monetary policies, foreign economic activity, and energy prices form the input to the macroeconomic model. This model projects GDP (all final sales in the economy) and the distribution of GDP by its major demand components (consumer expenditures, investment, government consumption and gross investment, and exports and imports). Estimating the intermediate flows of goods and services—for example, the steel incorporated into automobiles—is the next step in the projections process. The resulting estimates of demand for goods and services are used to project industry output of final products as well as total output by industry. Industry output of goods and services is then used to estimate industry employment. Trends in productivity are used to evaluate the future output per worker hour, and additional analysis is used to calculate worker hours. These estimates, along with output projections, are used to develop the final industry employment projections. An industry-occupation matrix, also known as the National Employment Matrix, is used to project employment for wage and salary workers. The matrix shows occupational staffing patterns—each occupation as a percent of employment in every industry. The matrix covering the 2008-18 period includes 276 detailed industries and 750 detailed occupations. Data for current staffing patterns in the matrix come from the BLS Occupational Employment Statistics (OES) survey, which collects data from employers on a 3-year cycle. The occupational staffing patterns for each industry were projected based on anticipated changes in the ways in which goods and services are produced, and were then applied to projected industry employment. The resulting employment was summed across industries to derive total wage and salary employment by occupation. Using this method, rapid employment growth is projected for healthcare workers, such as pharmacists and physical therapists, while employment of newspaper publishing workers, such as reporters and correspondents, is expected to decline, reflecting the projected changes in the healthcare and newspaper publishing industries, respectively. Employment in an occupation also may grow or decline as a result of many other factors. For example, relatively fast growth is expected among computer systems analysts and software engineers as organizations continue to adopt increasingly sophisticated technology. On the other hand, automation, the expanding use of computers, and developments in computer software will result in declining employment among procurement clerks, order clerks, and word processors and typists. The projected-year matrix incorporates these expected changes. Data on self-employed workers in each occupation come from the Current Population Survey (CPS). Numbers of self-employed workers were projected separately. Replacement needs. In most occupations, replacement needs provide more job openings than growth. Replacement openings occur as people leave occupations. Some individuals transfer to other occupations as a step up the career ladder or to change careers; some stop working temporarily, perhaps to return to school or care for a family; other workers—retirees for example—leave the labor force permanently. A discussion of replacements and the methods used to prepare estimates is presented on the Bureau’s Employment Projections homepage at http:/www.bls.gov/emp.
Last Modified Date: December 17, 2009 |
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