# Presentation: 057615

## Office of Occupational Statistics and Employment Projections: 	Methods Overview

**James C. Franklin**
- (202) 691-5709
- Franklin.James@bls.gov
- http://www.bls.gov/emp/home.htm

## History of the Projections	

- Began looking at future job prospects more than 50 years ago.  Trying to help WWII veterans find work.
- Developed medium- to long-term projections for more than 35 years

## BLS Projections Overview

- Projections are developed in four areas:
- Labor force
- Aggregate economic activity
- Industry output and employment
- Occupational employment

## The BLS Projections Publications

- Monthly Labor Review:
*http://www.bls.gov/opub/mlr/2004/02/contents.htm*
- Occupational Outlook Handbook:
*http://www.bls.gov/oco/home.htm*
- Career Guide to Industries:
*http://www.bls.gov/oco/cg/home.htm*
- Occupational Outlook Quarterly:
- http://www.bls.gov/opub/ooq/2005/winter/contents.htm
- Occupational Projections and Training Data:
*http://www.bls.gov/emp/optd/home.htm*

##       Who Uses the BLS Projections? 

- Career counselors and students
- Education administrators
- Private consulting and research firms
- Academic economists in U.S. and abroad
- Politicians and the Media
- Government agencies

## The Projections Process

- Force

- Aggregate
-  Economy

- Industry
-  Output

- Industry
-  Employment

- Occupational
-  Demand

**The Projections Process**

- Final
- Demand

- “Macro Model”, Demographic, fiscal & monetary policy, foreign economies, energy prices

- Economic census, annual economic surveys, other data sources

- BEA benchmark-year input-output tables, BLS time-series estimates

- Industry output, sector wage rates, technological change

- Staffing pattern ratio analyses, industry-specific studies, staff expertise

- Population, labor force, participation rate trends, category constraint

## The Labor Force - What Is It?

- The labor force is comprised of those age 16 and over who:
- Are working full- or part-time, or
- Are unemployed but are actively seeking work.

## The Labor Force - What Is Projected?

- 		Projections are made for a number of demographic categories:
- Sex (Men & Women)
- By Race
-  One race (White, Black, & Asian)
-  All other groups (multiple racial origin, American Indian and Alaska Native, Native Hawaiian & other Pacific islanders)
- By Age (predominantly 5-year age categories)
- The results are aggregated to yield the projected labor force.  In addition,
- projections are made for these categories:
- Ethnicity
-  Hispanic origin
-  Other than Hispanic origin
- White, non-Hispanic**         **

##      The Labor Force - How is it Projected?

- Labor force participation rates are compiled historically:
- LFPR = Labor Force / Non-institutional Population
- Rates are extrapolated to target year based on past behavior and subject to inter-category constraints.
- Census population forecasts obtained by age, sex, race, and ethnicity.
- Multiplying participation rate by population yields projected labor force estimate for each category.

**LFPR  *  Population  =  Labor Force**

## The Projections Process

- Force

- Aggregate
-  Economy

**The Projections Process**

- Industry Final
- Demand

- “Macro Model”, Demographic, fiscal & monetary policy, foreign economies, energy prices

- Economic census, annual economic surveys, other data sources

- Population, labor force, participation rate trends, category constraint

##   Aggregate Economy

- Aggregate economic projections are developed using a macroeconomic model.
- The macro model is from the Macroeconomic Advisors quarterly model.
- 543 behavioral & identity relationships
- 201 exogenous variables
- Assumptions are provided to the model.
- Model is solved over the forecast period.

##       Aggregate Economy - Assumptions

- Demographic
- Population
- Labor force
- Fiscal policy
- Federal defense & nondefense spending
- Grants-in-aid
- Transfer payments
- Tax rates
- Monetary policy
- Federal funds rate
- Energy prices
- Imported oil price (dollar per barrel)

##       Aggregate Economy - Key Results

- Real GDP, level & growth rate
- Civilian unemployment rate
- Aggregate employment, by household & establishment
- Labor productivity growth rate
- Inflation (GDP price index)
- Federal budget deficit/surplus
- Foreign trade deficit/surplus

##      The Aggregate Economy - Key Results

- Demand components of GDP—
- Personal consumption expenditures
- Gross private domestic investment
- Nonresidential equipment and software
- Nonresidential structures
- Residential structures
- Change in business inventories
- Foreign Trade
- Exports of goods and services
- Imports of goods and services
- Government consumption expenditures and gross investment

## The Projections Process

- Force

- Aggregate
-  Economy

**The Projections Process**

- Final
- Demand

- “Macro Model”, Demographic, fiscal & monetary policy, foreign economies, energy prices

- Economic census, annual economic surveys, other data sources

- Industry
-  Output

- Industry
-  Employment

- Occupational
-  Demand

- BEA benchmark-year input-output tables, BLS time-series estimates

- Industry output, sector wage rates, technological change

- Staffing pattern ratio analyses, industry-specific studies, staff expertise

- Population, labor force, participation rate trends, category constraint

##      Final Demand and the Input-Output Model

- Outputs

- Inputs

- Intermediates-  The Input Output (I-O) Table

- +

- Commo-dity Output

- =

- C

- I

- G

- X-I

- Value Added (Income)

- Industry Output

- +

- =

-      Final Demand and the Input-Output Model

**Final Demand**

## Final Demand	

- FD = C + I + X – M + G
- 	C= Personal consumption expenditures
- 	I = Investment  = Private investment in equipment and software 		       + Nonresidential construction 			                    + Residential construction
-                                  + Change in private inventories
- 	X = Exports
- 	M = Imports
- 	G = Government consumption expenditures and investment

## Data Sources for Final Demand

- The historical matrices are compiled mostly from data published in BEA’s NIPA accounts and I-O systems.
- Additional data for the Trade columns is obtained from the Trade Policy Information System (TPIS) database of the Department of Commerce.
- The State and Local government columns require additional data from the Bureau of the Census.

## To project final demand, an historical time series is developed on a nominal and a real basis.

Independent estimates are made for:
Industry and commodity output
Final demand
Value added

Based on BEA’s benchmark Input-Output tables.

RAS technique applied to create historical  series of balanced input-output tables.

- Independent estimates are made for:
- Industry and commodity output
- Final demand
- Value added
- Based on BEA’s benchmark Input-Output tables.
- RAS technique applied to create historical  series of balanced input-output tables.

- Developing Historical Tables

## Each component is forecasted with independently solved models:

		PCE 		– Houthakker-Taylor consumer 			   	   behavior model
		PIES	 	– Modified neoclassical model
		CIPI		– Inventory target adjustment model

The chain-weighted aggregation of each major group is constrained to the result from the macro-model.

- 		PCE 		– Houthakker-Taylor consumer 			   	   behavior model
- 		PIES	 	– Modified neoclassical model
- 		CIPI		– Inventory target adjustment model
- The chain-weighted aggregation of each major group is constrained to the result from the macro-model.

- Forecasting Final Demand

## Inter-industry Relationships

- Y

- X

- q = Xe                g = Ye
- where:
- 	e = final demand vector
- 	q = commodity output
- 	g = industry output

- Use
- Table

- Direct
- Requirements

- Total
-  Requirements

- Industry

- Commodity

- Make
- Table

- Market
- Shares

- Total
-  Requirements

- 

- 

- 

- 

- 

- 

- Industry Output

- Projected components of final demand are concatenated to form final demand matrix.
- Market share and direct requirements tables are projected.
- Total requirements tables are created and used to project:
- Commodity output
- Industry output

## The Projections Process

- Force

- Aggregate
-  Economy

**The Projections Process**

- Final
- Demand

- “Macro Model”, Demographic, fiscal & monetary policy, foreign economies, energy prices

- Economic census, annual economic surveys, other data sources

- Industry
-  Output

- Industry
-  Employment

- Occupational
-  Demand

- BEA benchmark-year input-output tables, BLS time-series estimates

- Industry output, sector wage rates, technological change

- Staffing pattern ratio analyses, industry-specific studies, staff expertise

- Population, labor force, participation rate trends, category constraint

## Industry Employment

- Total hours paid are derived for each industry as:
- Hi = f (outputi, real wagei, time)
-  Average weekly hours for each industry:
- AWHi = g (unemployment rate, time)
- Industry employment is determined by the identity:
- Ei = (Hi / AWHi ) * (1 / 52)
- Employment projections by industry are constrained to the aggregate employment projected in the macroeconomic model.

## Evaluating Industry Employment

- Output growth rate
- Labor productivity growth rate

**Employment = ****Output**** / Productivity**

## The Projections Process

- Force

- Aggregate
-  Economy

**The Projections Process**

- Final
- Demand

- “Macro Model”, Demographic, fiscal & monetary policy, foreign economies, energy prices

- Economic census, annual economic surveys, other data sources

- Industry
-  Output

- Industry
-  Employment

- Occupational
-  Demand

- BEA benchmark-year input-output tables, BLS time-series estimates

- Industry output, sector wage rates, technological change

- Staffing pattern ratio analyses, industry-specific studies, staff expertise

- Population, labor force, participation rate trends, category constraint

## Occupational Demand – What?

- Industry by occupation staffing pattern matrix:
- 336 4-digit NAICS industries
- 754 SOC occupations
- Distributes wage and salary employment in each industry to all occupations used by that industry to create its output.
- A separately determined distribution of self-employed and unpaid family workers by occupation completes the picture of occupational demand in the economy.

## Occupational Demand – How?

- Staffing patterns are assembled from historical data then modified based on various factors:
- Technological changes
- Changing business practices
- Changes in industry activity

## Occupational Demand – How?

- Analysts assign change factor for an occupation in a specific industry.
- Staffing patterns are applied to industry employment.
- Industry employment for an occupation summed across industries to estimate occupational employment.

## Replacement Demand

- Total job openings made up of:
- New jobs created
- Replacement needs for those who have
- Died
- Retired
- Moved to another occupation
- Replacement needs often outweigh new job creation as a source of job growth.

## Reviewing the Projections

- Initial estimates are reviewed internally by the entire staff, resulting in bottom-up feedback to each stage of the process.
- Secondary review involves other program offices within the Bureau:
- Current Employment Statistics & Current Population Survey (establishment and household employment estimates)
- Productivity & Technology (industry productivity estimates)
- Commissioner of BLS (overall policy implications)

## 

http://www.bls.gov/emp/home.htm

- http://www.bls.gov/emp/home.htm

- BLS Projections on the Internet