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State and Metro Area Employment, Hours, & Earnings

Implementation of new small area model

Effective with the release of January 2022 estimates on March 14, 2022, CES implemented a new generation small area model for state and metropolitan area series. The new model will replace the CES small domain model and variants of the Fay-Herriot model in estimating private sector series with insufficient sample for direct sample-based estimation. The new model can be considered a generalization of the Fay-Herriot model. Like the Fay-Herriot models, the model uses a linear regression to link direct estimates with predictors (in this case, the same-month five-year average of relative employment change in the benchmark data). However, the new generation model loosens many of the assumptions in the Fay-Herriot, particularly the assumption that the variances are fixed and known. More information on the new model is detailed in the paper "Bayesian Nonparametric Joint Model For Domain Point Estimates and Variances Under Biased Observed Variances" by Julie Gershunskaya and Terrance Dean Savitsky.