Monthly Labor Review September 1997 3

1995 BLS Projections

The Bureau of Labor Statistics prepares projections of the labor force, industry employment, and occupational employment

every other year. Because of the uncertainty inherent in making these projections, the Bureau

evaluates the results of past projections each time

a target year is reached, to gauge how well the projections tracked against actual change. The evaluations provide users of BLS projections with information to enhance their understanding of the

problems faced in developing accurate projections

and to assess the manner of using projections in

the future. Among the many users of projections

are those in the fields of career guidance, education planning, and public policy formulation. In

these fields, numerous decisions are made based

on differences in projected labor force growth rates

by race, age, sex, and Hispanic origin and on comparisons of growth rates among industries and occupations. State employment security agencies incorporate data from BLS projections into the models

they use to develop industry and occupational projections for their State. Business officials in the

private sector utilize the projections in personnel

planning and marketing research. Academic researchers employ the projections as background

information to study a wide variety of topics dealing with the labor market. Knowledge of the accuracy of BLS projections affects whether an individual or agency will rely on the projections in the

future and, if so, how the projections will subsequently be used.

The Bureau also considers evaluation to be

an important stage of its projections program.

Through evaluation, the Bureau can identify

strengths and weaknesses in procedures used to

prepare the projections. Such identification leads

to changes in those procedures for use in the development of later projections.

Many causes of inaccuracies in the projections

are identified in studies comparing actual with

projected change in the labor force, industry employment, and occupational employment. Some

of the broad assumptions made in the models used

to develop the projections, such as levels of defense expenditures, are very sensitive to political

forces and, therefore, subject to great uncertainty

over a 10-year period. Other broad assumptions,

such as the strength of the world economy, also

are subject to considerable variability and are very

important to levels of exports and imports that

have a great impact on employment. In addition,

a multitude of judgments stemming from the

analyses conducted by BLS staff in determining

specific effects of technological change are subject to significant error. For example, in assessing the impact of word-processing equipment on

the employment of typists, it seemed clear in 1984

that technology would have a negative effect. That

assessment turned out to be correct, but the projected decreases in the utilization of typists made

by BLS analysts in gauging future staffing patterns

of industries fell short of actual decreases.

Evaluating the 1995

BLS projections

Projections of the labor force and industry and occupational

projections to 1995 were relatively accurate; differences

that did occur are identified and analyzed to inform

users and to improve future projections

H ow ard N Fullerton,

Jr., is a demographic

statistician in the

Office of Employment

Projections, Bureau of

Labor Statistics. Arthur

Andreassen and

Carolyn M. Veneri are

economists in the

same office.

H ow ard N Fullerton,

Jr.,

Arthur Andreassen,

and

Carolyn M. Veneri

Introduction

Neal H. Rosenthal

Neal H. Rosenthal is Associate Commissoner, Office of

Employment Projections, Bureau of Labor Statistics.
4 Monthly Labor Review September 1997

1995 BLS Projections

Evaluation measures

The general procedure the Office of Employment Projections uses to evaluate

projections is to compare projected with

actual data. Such comparisons can be

presented in a variety of statistical measures, such as percent change or numerical growth. One of the problems with

these measures is that it is difficult to

determine the quality of the projections,

because there are no established criteria

to categorize them as good or bad. For

example, if actual data show that employment in an occupation increased by

20 percent, and the Bureau projected a

growth rate of, say, 10 percent (or 30

percent or 40 percent, for that matter), it

is not clear whether the projected rate is

good or bad. Consequently, users must

establish their own standards of quality,

based on the uses they make of the projections. In general, if their decisions

would not differ if the projections were

perfect, then the error is not significant.

For instance, referring back to the foregoing numbers, if a user would have

made the same decisions if the projected

level were perfect (20 percent) as he or

she in fact made with the 30-percent projection of growth, then the 30-percent

projection may not be accurate, but it

can be assumed to be accurate enough

for that user’s needs.

Because standards are not available,

several measures that compare projected

and actual employment are presented in

the evaluations of labor force, industry

employment, and occupational employment projections that follow. These include

a simple comparison of the direction of

change to see whether employment in the

occupations that were projected to grow

or decline actually did change in the direction projected. Numerical change also is

presented, but the use of this measure to

determine general accuracy can distort an

evaluation, because the quality of projections having the same numerical error are

different for occupations having different

employment levels in the base year of the

projection. For this reason, the measure

given the most attention in the evaluations

is the absolute percent error—the numerical error (positive or negative) divided by

actual employment in the target year of

the projection. Another measure used to

evaluate the projections is a comparison

of the distribution of the projected change

with the distribution of the actual change.

This measure is important for identifying

whether any particular projection errors are

related to judgment errors tied to a specific

industry or occupation or to general projections of total employment.

The projection period used by the

Bureau typically has ranged from 10 to

15 years, with the target year always ending in a zero or a five. The year 1995 was

the target year of two sets of projections,

1982–95 and 1984–95. Only the 1984–

95 projections are evaluated in this article, because the classification of occupations that was used for the 1982–95

projections was based on a system significantly different from the one used to

tabulate current 1995 data. The Bureau’s

1984–95 projections included three alternative scenarios, labeled high, moderate,

and low growth. Only the moderategrowth projections are evaluated here, as

they were the chief ones used by the Bureau, the alternatives having been used

only sparingly, not just by the Bureau,

but by others as well. In the 1996–2006

projections currently being developed (to

be published in the November 1997 issue of the Review), only a moderategrowth scenario is being prepared.

The reader should note that differences in projected change and actual

change are subject to measurement error because of both normal response errors and statistical errors associated with

the surveys used to measure current employment in the base year, as well as the

target year, of the projections. Some of

these errors stem from changes in the

surveys used to compile the data over

time. For example, a modification was

made to the Current Population Survey

(CPS) in 1994 that significantly changed

the reporting of labor force participation

for older workers. This in turn had a

measurable, significant impact on the

quality of labor force participation rate

projections for these workers. Accordingly, some projection errors identified

in the evaluations may well reflect the

effect of data collection changes in the

CPS.

The labor force, industry employment, and occupational employment

projections are highly interrelated, as the

models used to develop each of these

segments are dependent on each other.

For example, the labor force projections

have a great bearing on total employment projections, and industry employment projections influence occupational

projections, because occupations tend to

be concentrated by industry. The closeness of these relationships is shown

clearly in the evaluations.

In general, the evaluations demonstrate that the BLS projections captured

major trends in the labor force, in industry employment, and in occupational

employment. The discussions that follow,

however, each written by a different author, tend to focus on the inaccuracies of

the projections. Odd though this may

seem, it enables users to get a better understanding of the factors that are most

likely to lead to projection errors.