CES Net Birth/Death Model

Currently, the CES sample includes about 142,000 businesses and government agencies drawn from a sampling frame of Unemployment Insurance tax accounts which cover approximately 689,000 individual worksites. The active CES sample includes approximately one-third of all nonfarm payroll workers. The sample-based estimates are adjusted each month by a statistical model designed to reduce a primary source of non-sampling error which is the inability of the sample to capture, on a timely basis, employment growth generated by new business formations.

There is an unavoidable lag between an establishment opening for business and its appearance on the sample frame making it available for sampling. Because new firm births generate a portion of employment growth each month, non-sampling methods must be used to estimate this growth.

Earlier research indicated that while both the business birth and death portions of total employment are generally significant, the net contribution is relatively small and stable. To account for this net birth/death portion of total employment, BLS uses an estimation procedure with two components: the first component excludes employment losses due to business deaths from sample-based estimation in order to offset the missing employment gains from business births. This is incorporated into the sample-based estimate procedure by simply not reflecting sample units going out of business, but imputing to them the same trend as the other firms in the sample. This step accounts for most of the birth and death employment.

The second component is an auto-regressive integrated moving average (ARIMA) time series model designed to estimate the residual birth/death employment not accounted for by the imputation. The historical time series used to create and test the ARIMA model was derived from the UI universe micro level database, and reflects the actual residual of births and deaths over the past 5 years. This ARIMA model was originally applied once a year using new data to calculate the net birth/death forecasts. Effective with the release of preliminary January 2011 employment estimates in February 2011, BLS began updating the Current Employment Statistics (CES) net birth/death model component of the estimation process more frequently, generating birth/death forecasts on a quarterly basis instead of annually. For more information about the quarterly birth/death forecasts, please see www.bls.gov/ces/ces_quarterly_birthdeath.pdf. For a comparison of annual birth/death forecasts to quarterly birth/death forecasts for all years from 2004 to the 2014 benchmark, please see www.bls.gov/ces/cesqbdcomp.htm.

The net birth/death model components are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources in the CES estimates such as sampling error or design limitations. Note that the net birth/death forecasts are not seasonally adjusted, and are applied to the not seasonally adjusted monthly employment estimates to derive the final CES employment estimates.

The table below shows the net birth/death model adjustment used in the published CES estimates since the establishment of the most recent benchmark level for March 2018.

Additional information on the CES Birth/Death Model is available in the CES Technical Notes under Business birth and death estimation (www.bls.gov/web/empsit/cestn.htm#section6c) as well as on the birth/death frequently asked questions page at www.bls.gov/web/empsit/cesbdqa.htm.

Historical birth/death forecasts are available at www.bls.gov/web/empsit/cesbdhst.htm.

An overview of the CES birth/death model, including a detailed description of the original methodology is available at www.bls.gov/opub/mlr/2006/05/art4full.pdf.

Last Modified Date: April 5, 2019

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