Bureau of Labor Statistics

Issues in Labor Statistics:

How the Business Birth/Death Model 

Improves Payroll Employment 

Estimates

Bureau of Labor Statistics

October 3, 2008
Issues in Labor Statistics: 

How the Business Birth/Death Model Improves Payroll Employment Estimates 

Each year, the Current Employment Statistics (CES) program adjusts its sample-based 

estimates of industry employment for the previous year to universe employment counts 

derived primarily from the Quarterly Census of Employment and Wages (QCEW).1 CES 

recently announced a preliminary benchmark revision of -21,000 for its March 2008 total 

nonfarm employment estimate, an adjustment of less than one-tenth of one percent; the 

average absolute revision over the past decade is two-tenths of one percent.2

 (See table 

below.) The preliminary 2008 benchmark calculation indicates that the CES estimate of 

March 2007 – March 2008 employment change (+500,000) is nearly identical to that 

reflected in QCEW universe counts (+479,000).3

 Accurate CES employment estimates 

are made possible in part by the use of the “birth/death” model, an adjustment developed 

by BLS to account for the net employment change stemming from business births and 

deaths that cannot be captured in real-time by the CES sample.4 The birth/death 

adjustment has consistently resulted in a smaller benchmark revision than would have 

been the case if the sample alone were used to measure payroll employment change. (See 

chart 1.) 

Historical Benchmark Revisions in the CES Survey, Preliminary and Final 

Benchmark 

Year 

Preliminary 

Revision 

Final 

Revision 

Final Revision 

(% of Total 

Nonfarm 

Employment) 

Difference 

(Preliminary to 

Final) 

1999 146,000 258,000 0.2 112,000 

2000 392,000 468,000 0.4 76,000 

2001 -76,000 -123,000 -0.1 -47,000 

2002 -284,000 -313,000 -0.2 -29,000 

2003 -145,000 -122,000 -0.1 23,000 

2004 236,000 203,000 0.2 -33,000 

2005 -191,000 -158,000 -0.1 33,000 

2006 810,000 752,000 0.6 -58,000 

2007 -297,000 -293,000 -0.2 4,000 

2008 -21,000 (N/A) (N/A) (N/A) 
Actual net employment change from business births and deaths follows a relatively stable 

trend across years and is not highly correlated with changes in the business cycle, or even 

with changes in overall employment. The stability of this component enables BLS to 

produce reasonably accurate forecasts of birth/death employment despite the model’s use 

of historical data as its input. Chart 2 illustrates the stable trend of actual net employment 

change from business births and deaths over the past decade in contrast with the changes 

in total nonfarm employment. 

Chart 1: Impact of Birth/Death Model on Benchmark Revisions (in thousands)

-500 0 500 1000 1500 2000

Mar 02-03

Mar 03-04

Mar 04-05

Mar 05-06

Mar 06-07

Mar 07-08 (p)

Actual Benchmark Revision

Birth/death Adjustment

Simulated Benchmark Revision

Without Birth/Death Adjustment

Actual Benchmark Revision -122 203 -158 752 -293 -21

Birth/death Adjustment 458 635 830 880 1073 782

Simulated Benchmark Revision

Without Birth/Death Adjustment

366 838 672 1632 877 761

Mar 02-03 Mar 03-04 Mar 04-05 Mar 05-06 Mar 06-07 Mar 07-08 

(p)
The relative stability of the birth/death component means that it is the sample, rather than 

the birth/death component, that primarily drives year-to-year changes in the trend of CES 

payroll employment estimates. 

The ratio of the birth/death contribution to the overall net employment change varies 

substantially from month to month and year to year because the birth/death model 

measures a component that does not reflect the business cycle and is not intended to. 

While birth/death forecasts follow different trends than those of the sample, their 

contribution toward the accuracy of CES payroll employment estimates is welldocumented via their role in reducing benchmark error. CES continues to investigate 

methods to enhance the birth/death model to further improve the accuracy of its forecasts. 

Chart 2: Total Nonfarm Employment Change vs. 

Actual Net Birth/Death Employment Change (in thousands)

-3000

-2000

-1000

0

1000

2000

3000

4000

Over-the-Year Total Nonfarm

Employment Change

Actual Net Birth/Death

Employment Change

Trend - Over-the-Year Total

Nonfarm Employment Change

Over-the-Year Total Nonfarm

Employment Change

1163 -2017 -524 871 2019 2830 1665 500

Actual Net Birth/Death

Employment Change

735 607 700 718 726 1122 792 785

Mar 00-

01

Mar 01-

02

Mar 02-

03

Mar 03-

04

Mar 04-

05

Mar 05-

06

Mar 06-

07

Mar 07-

08 (p)
For additional information contact Brian Dahlin, an economist in the Division of Current 

Employment Statistics, Office of Employment and Unemployment Statistics. E-mail: 

cesinfo@bls.gov. Telephone: (202) 691-6555. Information in this summary will be made 

available to sensory-impaired individuals upon request. Voice phone (202) 691-5200. 

Federal Relay Service: (800) 877-8339. This report is in the public domain and may be 

reproduced without permission. 

Notes 

 

1

 The QCEW is a nearly complete count of employment for all businesses in the US and is based on 

administrative records of the Unemployment Insurance tax system that most businesses are required to file 

with their state. The benchmark adjustment procedure replaces the March sample-based employment 

estimates with the employment levels from the universe for March of each year. For more information on 

the QCEW, see http://www.bls.gov/qcew/. 2

 The final benchmark revision will be incorporated with the release of January 2009 estimates, and is 

subject to change; historically, the preliminary revision has not differed greatly from the final revision. 

Revision is based on not seasonally adjusted data. 

3

 Preliminary number, based on not seasonally adjusted data. 

4

 See http://www.bls.gov/ces/cesbdtech.htm for additional technical information regarding the birth/death 

model.