14 Monthly Labor Review October 2006

New Construction Employment Series ‘

Two new construction employment

series for specialty trade contractors

Specialty trade contractors account for nearly

two-thirds of workers in construction; new research permits

BLS to publish separate employment series for contractors

engaged in the residential and nonresidential markets

Christopher Manning

John P. Mullins

Christopher Manning

and John P. Mullins

are economists in the

Current Employment

Statistics Division,

Office of Employment

and Unemployment

Statistics.

The construction industry is vital to the

American economy, with construction

expenditures accounting for nearly 9 percent of gross domestic product in 2004.1

 Construction is closely integrated with a range of

related industries, and it is the principal builder of

real estate—one of the Nation’s largest asset

classes. Because of the industry’s prominence in

the economy, it often serves as a bellwether and is

widely watched and measured.

Many kinds of data on the industry are produced, both by government agencies and by

private companies and organizations. Monthly

estimates of employment, produced by the Current

Employment Statistics (CES) program of the Bureau

of Labor Statistics (BLS), are an important component of construction industry data.2

The CES survey is a monthly panel survey of

more than 160,000 nonfarm businesses representing about 400,000 establishments. CES estimates of employment, hours, and earnings are

some of the most timely and sensitive economic

indicators published by the Federal Government.

CES estimates are organized according to the 2002

North American Industry Classification System

(NAICS).3 CES estimates of construction employment are grouped into three large NAICS component industry classifications: Heavy and civil

engineering construction, construction of buildings, and specialty trade contractors. All three industries engage, to some extent, in both the

residential and the nonresidential markets. Despite

this, the NAICS coding system supports residential

and nonresidential breakouts only for construction

of buildings. No such detail is available for

specialty trade contractors, the largest and most

dynamic component of the construction industry.

To remedy this limitation, the CES program began

producing and publishing employment series for

residential specialty trade contractors and nonresidential specialty trade contractors in 2005.

(Exhibit 1 contrasts the NAICS 2002 classification

structure with the new CES publication structure,

which includes the additional residential and nonresidential groupings.) This was done after research

revealed the analytical benefits gained from the

breakout.4 This paper explains the methodology

behind the research and the results that led to the

new construction employment series.

Missing an important distinction

The specialty trade contractors industry includes

establishments that are primarily responsible for

performing specific trades activities related to

building construction but are not responsible for

the entire project. Establishments in this industry

typically perform tasks such as pouring concrete,

preparing sites, plumbing, painting, and doing electrical work.5

 These firms usually specialize within

their trades in either residential or nonresidential

construction; this specialization, however, is not

captured in the NAICS coding system. Therefore,

employment data for this industry include both

residential and nonresidential construction, despite

each being driven by different market forces.

Consider, as an example, establishments that

perform electrical work. The production activities

involved in electrical work for a residential structure

such as an apartment complex are essentially the

New Construction Employment Series
Monthly Labor Review October 2006 15

same as those for a nonresidential structure such as an office

building. Establishments performing work on either type of

structure would be classified in the industry electrical

contractors. Therefore, examination of the employment trend for

electrical contractors reveals the combined employment effects

of market forces for both residential and nonresidential

construction. This paints an incomplete picture because market

demand for residential and nonresidential construction can be

different and often in opposition. Given that specialty trades

employment makes up 64 percent of total construction jobs (see

chart 1), it is analytically limiting not to be able to measure how

employees in the specialty trade contractors industry are

distributed between residential and nonresidential work.

Constructing the experimental series

The CES program initiated research to determine the feasibility of

producing and publishing estimates for specialty trade

contractors in the residential and nonresidential construction

industries. We independently generated two series for specialty

trade contractors using separate estimation cells and aggregation structures but using the same microdata.6

 The first series

was a control series structured to replicate current CES estimation

procedures. Employment estimates were generated at the fivedigit NAICS level, with most series stratified into regional

estimation cells. The regional estimates were aggregated to the

five-digit level by simple addition, and all of the five-digit series

were used to aggregate to the four-digit and then to the threedigit levels. There was no residential or nonresidential classification in this series.

In contrast, the second series was an experimental series based

on the residential or nonresidential classification of establishments. As mentioned earlier, the standard NAICS coding structure

used by CES supports residential and nonresidential breakouts

for four-digit NAICS industries under construction of buildings,

but not for industries under specialty trade contractors.

However, the Quarterly Census of Employment and Wages

(QCEW) program enhanced the NAICS coding structure for

specialty trade contractors to classify establishments as

residential and nonresidential.7 The QCEW serves as both the

sampling frame and the source of annual employment benchmarks

for the CES program. This enhanced coding by the QCEW

program allowed the CES program to develop monthly samplebased estimates for specialty trade contractors on a residential

and nonresidential basis.

To maintain enough sample to generate reliable estimates for

the experimental series, estimation cells were established at a

higher aggregate level than for the control series. Specifically,

residential and nonresidential estimates were generated at the

four-digit NAICS level, with most series stratified into regional

Coding of construction employment: NAICS 2002 structure versus the

modified CES publication structure

23 – Construction 23 – Construction

236 – Construction of buildings 236 – Construction of buildings

2361 – Residential building 2361 – Residential building

2362 – Nonresidential building 2362 – Nonresidential building

237 – Heavy and civil engineering construction 237 – Heavy and civil engineering construction

2371 – Utility system construction 2371 – Utility system construction

2372 – Land subdivision 2372 – Land subdivision

2373 – Highway, street, and bridge construction 2373 – Highway, street, and bridge construction

2379 – Other heavy construction 2379 – Other heavy construction

238 – Specialty trade contractors 238 – Specialty trade contractors

part 238 – Residential specialty trade contractors

part 238 – Nonresidential specialty trade contractors

2381 – Building foundation and exterior contractors 2381 – Building foundation and exterior contractors

part 2381 – Residential building foundation

 and exterior contractors

 part 2381 – Nonresidential building foundation

 and exterior contractors

2382 – Building equipment contractors 2382 – Building equipment contractors

 part 2382 – Residential building equipment contractors

 part 2382 – Nonresidential building equipment contractors

2383 – Building finishing contractors 2383 – Building finishing contractors

 part 2383 – Residential building finishing contractors

 part 2383 – Nonresidential building finishing contractors

2389 – Other specialty trade contractors 2389 – Other specialty trade contractors

 part 2389 – Other residential specialty trade contractors

 part 2389 – Other nonresidential specialty trade contractors

CES publication structure with additional residential

and nonresidential series NAICS 2002 structure

Exhibit 1.
16 Monthly Labor Review October 2006

New Construction Employment Series

estimation cells. The regional estimates were aggregated to the

four-digit NAICS residential, nonresidential, and total levels,

which were used to aggregate to the three-digit NAICS residential,

nonresidential, and total levels. Exhibit 2 compares the cell

structure for the control group (which reflects traditional cell

structure) with the cell structure for the experimental series (which

supports a residential-nonresidential classification).

The research was structured to replicate current monthly

estimation procedures, with one major difference. The official

monthly CES employment estimates are constructed from two

components: A component that uses the over-the-month change

in the sample reports to move the previous level to the currentmonth estimated level (known as a weighted link-relative technique),8

 and a model-based component used to help account for

net business births and business deaths not captured by the

sample (referred to as birth/death factors). Birth/death factors

for residential and nonresidential specialty trade contractors were

not available at the time of this research. Birth/death factors,

therefore, were excluded from both the control series and the

experimental series, making comparisons between the two runs

appropriate.

Estimates for both series were generated for three different

periods: March 2001 to March 2002, March 2002 to March 2003,

and March 2003 to December 2003. The March reference month

that starts each period represents a benchmark employment level

for the series.9 In practice, the benchmark employment level is

made up of three components: Employment from the Quarterly

Census of Employment and Wages (QCEW), presumed-notcovered (PNC) employment,10 and a proportional share of the

NAICS “other” employment.11 However, the benchmark employment level used in this analysis reflects only the QCEW

employment. PNC employment and NAICS “other” employment

have historically represented an extremely small portion of the

benchmark level, and as they do not impact the estimation

research in this report, they were excluded when setting the

benchmark level for these simulations.

Once the benchmark employment level was determined for

March of a given year, the April weighted link-relative (WLR)

formula was applied to that level to calculate the April estimate,

the May WLR formula was applied to the April estimate to

calculate the May estimate, and so on. The two independently

derived series were compared at the four-digit NAICS level, the

lowest industry level that the two estimates have in common. A

noniterative raking procedure was used to ensure that the

residential and nonresidential totals from the experimental series

were consistent with the specialty trades total from the control

series, calculated using the official industry-region cell structure.

A noniterative raking procedure is a one-time adjustment of the

Specialty trade contractors

64 percent

Construction of buildings

23 percent

Heavy and civil engineering

construction

13 percent

Chart 1. Construction employment by component industry, annual average 2004
Monthly Labor Review October 2006 17

residential and nonresidential employment estimates to control

totals. Because the residential and nonresidential series were

derived independently of the official construction series, the

residential and nonresidential series were proportionally adjusted

at the four-digit NAICS level to force their sum to equal the fourdigit NAICS employment estimate from the control series. It is

important to note that, when calculating the estimates, we applied

the WLR formula for each month to the previous month’s unraked

estimate.

The noniterative raking adjustment was performed for

each residential and nonresidential group as follows:

1. Residential employment and nonresidential employment were aggregated at the four-digit NAICS level.

2. This aggregate total was subtracted from the control

series at the four-digit NAICS level to determine the

amount of employment to be raked.

3. Ratios of residential-to-total employment and

nonresidential-to-total employment were calculated

for each four-digit NAICS series.

4. The total to be raked was multiplied by the ratios to

determine what percentage of employment to apply

to the residential group and what percentage to

apply to the nonresidential group.

5. Once the residential and nonresidential groups

received their proportional shares of raked employment, the two groups were rounded and aggregated

to the four-digit NAICS level. At this point they were

equal to the control series at the four-digit NAICS

level.

Additionally, the impact of NAICS code refiling was examined.

Specialty trades firms may often switch back and forth between

residential and nonresidential work. Large refiling impacts could

lead to large benchmark revisions and distort the trends measured by the residential and nonresidential series.12 Therefore,

code changes resulting from the Annual Refiling Survey for

2002 and 2003 were analyzed, both as a level and as a percent of

benchmark employment, to determine if NAICS refiling was a

cause for concern.13

Exhibit 2. Estimation cell structures used for the control and experimental series

2023811000 Poured concrete structure contractors

2023812000 Steel and precast concrete contractors 2023810100 Residential building foundation and exterior contractors

2023813000 Framing contractors

2023814000 Masonry contractors

2023815000 Glass and glazing contractors

2023816000 Roofing contractors 2023810200

2023817000 Siding contractors

2023819000 Other building exterior contractors

2023821000 Electrical contractors 2023820100

 2023822000 Plumbing and HVAC contractors

2023829000 Other building equipment operators 2023820200

2023831000 Drywall and insulation contractors

2023832000 Painting and wall covering contractors 2023830100 Residential building finishing contractors

2023833000 Flooring contractors

2023834000 Tile and terrazzo contractors

2023835000 Finish carpentry contractors 2023830200 Nonresidential building finishing contractors

2023839000 Other building finishing contractors

2023891000 Site preparation contractors 2023890100 Other residential specialty trade contractors

2023899000 All other specialty trade contractors 2023890200 Other nonresidential specialty trade contractors

BLS

Tabcode

for control

series

Title

BLS

Tabcode for

experimental

series

Aggregates to 2381 — Building foundation and exterior contractors

Title

Exhibit 2.

Control series estimation cells Experimental series estimation cells

Aggregates to 2382 — Building equipment contractors

Aggregates to 2383 — Building finishing contractors

Aggregates to 2389 — Other specialty trade contractors

Nonresidential building foundation and exterior contractors

Nonresidential building equipment contractors

Residential building equipment contractors
18 Monthly Labor Review October 2006

New Construction Employment Series

Research results

Results indicated that, in addition to producing traditional estimates, it is both feasible and beneficial to produce and publish

estimates for specialty trade contractors engaged in residential

and in nonresidential construction. There is no statistically

significant difference between the sum of residential and

nonresidential estimates made at the four-digit NAICS level and

estimates generated at the five-digit NAICS level without the

residential and nonresidential breakouts.

Initially, we examined the differences in the unraked estimates

by comparing the mean of the control series with the mean of the

experimental series at the three-digit and four-digit NAICS levels,

and performed a simple analysis of variance (ANOVA) to test the

null hypothesis that the means from the two series are equal. As

table 1 shows, the absolute difference in the mean of the two

unraked series is relatively small for all of the industries

examined, suggesting that the mean of the experimental series

is not significantly different from the mean of the control series.

The results from the ANOVA test support the hypothesis that the

means from the two series are equal. In particular, we focused on

the F-statistic and the p-value to test the validity of our

hypothesis. Generally, large F-statistics (relative to the level of

significance required) lead to the rejection of the null hypothesis.

Conversely, small p-values suggest that the null hypothesis is

unlikely to be true.14 In our analysis, at a 95-percent level of

confidence, an F-statistic above the critical value of 3.9862 or a

p-value below 0.0500 would lead us to reject the null hypothesis

that the means from the two series are equal. The F-statistics for

all of the series examined were quite low (0.0260 or lower)—well

below the critical value of 3.9862. Furthermore, the p-values for

all of the series were relatively high (.8724 or higher). These

results do not disprove the null hypothesis that the means from

the control series and the experimental series are equal and,

hence, there is no statistically significant difference between the

two series at the three-digit and four-digit levels.

Next, we compared the over-the-month changes in the two

series by calculating smoothness ratios at the three-digit and

four-digit NAICS levels.15 The smoothness ratio compares the

sum of the squared over-the-month changes in the experimental

series with the sum of the squared over-the-month changes in

the control series. A smoothness ratio below 1.00 indicates that

the sum of the residential and nonresidential estimates made at

the four-digit NAICS level has less variability in over-the-month

changes, while a smoothness ratio greater than 1.00 indicates

that estimates generated in the traditional manner provide a less

variable series. A smoothness ratio equal to 1.00 indicates that

there is no difference in the variation in over-the-month changes

between the two series. As Table 1 illustrates, the smoothness

ratio at the three-digit NAICS level is 1.00, indicating essentially

no difference in the over-the-month changes in the two series

at that level. At the four-digit NAICS level, differences in the

over-the-month changes are relatively small, usually ranging

between –1,500 and +1,500 employees. This finding is

underscored by the smoothness ratios at the four-digit level,

which are all either equal to or very close to 1.00, suggesting

no major differences between the series.

Raking the differences

Finally, we examined the amount of raking needed to force

additivity of the experimental series to the control series. As

described earlier, a noniterative raking procedure was performed

at the four-digit NAICS level for each residential and nonresidential

group to ensure that the residential and nonresidential totals

from the experimental series were consistent with the four-digit

total calculated using the official industry-region cell structure

(the control series). Table 2 shows the low, high, and average

employment needed to rake the residential and nonresidential

estimates from the experimental series to the control series.

The amount of employment raked each month was relatively

small, ranging from 0 in some months to 5,900 in July 2003 (in

building foundation and exterior contractors). In almost every

case, the amount raked represented less than 0.5 percent of

the monthly employment.

The benchmark revisions calculated in this research at the

four-digit NAICS residential and nonresidential levels are within

Difference in levels and over-the-month changes in unraked series for specialty trade contractors: NAICS

structure versus modified CES structure

238 All .............................................. 509 0.0002 0.9879 1.00

2381 Building foundation and exterior .... 891 .0078 .9301 1.02

2382 Building equipment .......................... 832 .0053 .9420 .98

2383 Building finishing ............................. 1,100 .0260 .8724 .99

2389 Other ............................................... 115 .0002 .9901 1.00

ANOVA results NAICS

code

Class of specialty

trade contractors

Absolute difference

in mean

employment

levels F-statistic p-value

Smoothness

ratio

Table 1.
Monthly Labor Review October 2006 19

the normal distribution of revisions for similarly sized industries.16

(See table 3.) However, as explained earlier, these do not reflect

the “true” benchmark revision for each industry. In practice, the

benchmark revision is calculated as benchmark employment

minus estimated employment. Estimated employment in this

research is missing a net birth/death component, while the

benchmark employment level is missing PNC employment and a

proportional share of the NAICS “other” employment. Nevertheless, based on the historical values of the missing components,

their inclusion would not significantly affect the size of the

benchmark revisions calculated here.

Finally, the impact of NAICS code refiling did not appear to be

an issue. Industry code changes were relatively small and did

not appear to have a major impact on benchmark revisions. Table

4 shows the code changes resulting from the Annual Refiling

Survey for 2002 and 2003—both as a level and as a percent of

benchmark employment—and their effect on the benchmark

revision. Code changes for specialty trade contractors were

relatively small at the three- and four-digit NAICS levels, even

within residential and nonresidential groupings. In most cases,

the code changes were less than 1 percent of benchmark

employment, meaning that their effect on the benchmark revision

was negligible.

The code changes were noticeably larger for the nonresidential

group than for the residential group in both years. In 2002, the

code changes were all positive, indicating that relatively few

firms switched from residential to nonresidential. In 2003, the

code changes for residential and nonresidential moved in

different directions for three of the four 4-digit NAICS series;

however, the magnitude of the differences does not suggest that

firms switched from residential to nonresidential at a rapid pace.

For the most part, it appears that employment entering the

Raked employment for specialty trade contractors, March 2001 to December 2003

238 All ................................................................. 0 5,900 1,300

2381 Building foundation and exterior ....................... 0 5,900 2,200

2382 Building equipment ............................................. 0 3,300 1,000

2383 Building finishing ................................................ 0 2,600 1,200

2389 Other .................................................................. 0 3,800 1,400

Monthly amount raked

NAICS

code Class of specialty trade contractors

Low High Average

Table 2.

Benchmark employment and magnitude of revision in benchmark employment of specialty trade

contractors, 2002 and 2003

238 All

Residential ............................................. 1,782 38 2.1 1,830 12 0.7

Nonresidential ........................................ 2,236 –23 –1.0 2,151 –10 –.5

 Total ............................................... 4,018 15 .4 3,981 2 .1

2381 Building foundation and exterior

Residential ............................................. 442 –1 –.2 463 7 1.5

Nonresidential ........................................ 419 –25 –6.0 410 13 3.2

 Total ............................................... 861 –26 –3.0 873 20 2.3

2382 Building equipment

Residential ............................................. 676 24 3.6 689 10 1.5

Nonresidential ........................................ 1,126 –5 –.4 1,073 -22 –2.1

 Total ............................................... 1,802 19 1.1 1,762 -12 –.7

2383 Building finishing

Residential ............................................. 455 19 4.2 466 0 0

Nonresidential ........................................ 383 6 1.6 368 0 0

 Total ............................................... 838 25 3.0 834 0 0

2389 Other

Residential ............................................. 209 –5 –2.4 211 –5 –2.4

Nonresidential ........................................ 309 1 .3 300 –1 –.3

 Total ............................................... 518 –4 –.8 511 –6 –1.2

Revision

Class and group of specialty

trade contractors

NAICS

code

March

level

2003

Level

Table 3.

2002

Benchmark employment

Percent

March Revision

level Level Percent

[Levels in thousands]
20 Monthly Labor Review October 2006

New Construction Employment Series

nonresidential specialty trade contractors industry is coming

from outside the specialty trade contractors industry, not from

the residential component.

Benefits are apparent

This article shows that, by using sound statistical methods,

reliable estimates of residential and nonresidential construction employment can be produced, yielding analytical

benefits. In particular, the breakout of residential and nonresidential construction allows analysis to determine which

type of business drives employment in specialty trade conIndustry code changes for specialty trade contractors, 2002 and 2003

2002

238 All

Residential .................................. 6 1,782 0.3 38 32 2.1 1.8

Nonresidential ............................. 16 2,236 .7 –23 –39 –1.0 –1.7

 Total .................................... 22 4,018 .5 15 –7 .4 –.2

2381 Building foundation and exterior

Residential .................................. 2 442 .5 –1 –3 –.2 –.7

Nonresidential ............................. 2 419 .5 –25 –27 –6.0 –6.5

 Total .................................... 4 861 .5 –26 –-30 –3.0 –3.5

2382 Building equipment

Residential .................................. 1 676 .1 24 23 3.6 3.4

Nonresidential ............................. 9 1,126 .8 –5 –14 –.4 –1.2

 Total .................................... 10 1,802 .6 19 9 1.1 .5

2383 Building finishing

Residential .................................. 2 455 .4 19 17 4.2 3.7

Nonresidential ............................. 3 383 .8 6 3 1.6 .8

 Total .................................... 5 838 .6 25 20 3.0 2.4

2389 Other

Residential .................................. 2 209 1.0 –5 –7 –2.4 –3.3

Nonresidential ............................. 3 309 1.0 1 –2 .3 –.6

 Total .................................... 5 518 1.0 –4 –9 –.8 –1.7

2003

238 All

Residential .................................. –3 1,830 –.2 12 15 .7 .8

Nonresidential ............................. 18 2,151 .8 –10 –28 –.5 –1.3

 Total .................................... 14 3,981 .4 2 –12 .1 –.3

2381 Building foundation and exterior

Residential .................................. 2 463 .4 7 5 1.5 1.1

Nonresidential ............................. 7 410 1.7 13 6 3.2 1.5

 Total .................................... 9 873 1.0 20 11 2.3 1.3

2382 Building equipment

Residential .................................. –4 689 –.6 10 14 1.5 2.0

Nonresidential ............................. 8 1,073 .7 –22 –30 –2.1 –2.8

 Total .................................... 5 1,762 .3 –12 –17 –.7 –1.0

2383 Building finishing

Residential .................................. –2 466 –.4 0 2 0 .4

Nonresidential ............................. 2 368 .5 0 –2 0 –.5

 Total .................................... 0 834 0 0 0 0 0

2389 Other

Residential .................................. 1 211 .5 –5 –6 –2.4 –2.8

Nonresidential ............................. 0 300 0 –1 –1 –.3 –.3

 Total .................................... 1 511 .2 –6 –7 –1.2 –1.4

Code

changes

as a

percent of

benchmark

employment

Class and group of specialty

trade contractors

NAICS

code

Code

changes Less effect

of code

changes

Table 4.

Benchmark

employment

level

Percent benchmark

Benchmark revision

revision

less

code

changes

Total

Benchmark

revision

Year

[Thousands]

tractors, the dominant sector in the construction industry.

This is illustrated in Table 5, which displays employment

trends in the specialty trade experimental series at the threedigit NAICS level. The table shows a slight decrease in specialty trade employment from March 2001 to March 2003,

mirroring a general decline in the entire construction sector.

However, focusing solely on the decrease in employment at

the three-digit specialty trade level masks a small increase in

employment of residential specialty trade contractors, which

occurred from March 2001 to March 2003. This growth was

overshadowed by a decrease in employment of nonresidential

specialty trade contractors.
Monthly Labor Review October 2006 21

Employment trends in the experimental construction series for specialty trade contractors, March 2001

to March 2003

238 All ................................ 4,096 3,980 –116 –2.8

Residential .................................. 1,752 1,830 78 4.5

Nonresidential ............................ 2,345 2,151 –194 –8.3

2381 Building foundation and exterior .... 871 872 1 .1

Residential .................................. 435 463 28 6.4

Nonresidential ............................ 436 410 –26 –6.0

2382 Building equipment .......................... 1,875 1,762 –113 –6.0

Residential .................................. 671 689 18 2.7

Nonresidential ............................ 1,204 1,073 –131 –10.9

2383 Building finishing ............................. 835 834 –1 –.1

Residential .................................. 442 466 24 5.4

Nonresidential ............................ 393 368 –25 –6.4

2389 Other ............................................... 515 512 –3 –.6

Residential .................................. 203 212 9 4.4

Nonresidential ............................ 312 300 –12 –3.8

Employment NAICS

code Class and group of specialty

trade contractors

Difference

March 2001 March 2003 Level

Table 5.

Percent

[Thousands]

This new type of analytical breakout adds another dimension to the extensive volume of construction data.

The residential and nonresidential series should be a

welcome addition to data users attempting to understand

opposing market forces and their impact on construction

employment.

Notes

1

 Construction expenditures data are available from the U.S. Census

Bureau on the Internet at www.census.gov/const/C30/total.pdf (visited

August 2005). Gross domestic product data are from the U.S. Bureau of

Economic Analysis. See Table 1.1.5 on the Internet at www.bea.gov/

bea/dn/nipaweb/index.asp (visited August 2005).

2 The Current Employment Statistics (CES) program is a monthly

survey conducted by State Employment Security Agencies in cooperation

with the Bureau of Labor Statistics (BLS). The survey provides

employment, hours, and earnings estimates based on the payroll records

of business establishments. Employment, as defined by CES, is the number

of persons who worked during, or received pay for, any part of the pay

period that includes the 12th of the month. The CES survey scope excludes

the self-employed, unpaid family workers, and workers in private

households and agriculture. The employment statistics for government

refer to civilian employees only. For more information on the program’s

concepts and methodology, see the BLS Handbook of Methods, Chapter 2,

at www.bls.gov/opub/hom/homch2_a.htm. CES data are available on

the Internet at www.bls.gov/ces/.

3

 The North American Industry Classification System (NAICS) is a

six-digit hierarchical coding system that groups establishments into

industries based on the activities in which they are primarily engaged.

NAICS was developed using a production-oriented conceptual framework

under which establishments using similar raw material inputs, similar

capital equipment, and similar labor are classified in the same industry.

NAICS is a collaborative effort among the United States, Mexico, and

Canada and offers industry comparability among the three countries.

4

 For detailed analysis on residential and nonresidential construction

employment, see John P. Mullins’ article, “Recent employment trends

in residential and nonresidential construction,” in this issue.

5

 The work performed by establishments classified as specialty trade

contractors may include new work, additions, alterations, maintenance,

and repairs. The work is usually subcontracted from general

contractors but can also be done for the owner of the property.

6 Employment estimates are made at what is termed the basic

estimation cell level and are aggregated upward to broader levels of

industry detail by simple addition. Basic cells are defined by industry

(usually at the five- or six-digit NAICS level). Within the construction

industry, stratification by geographic region also is used.

7

 For industries classified as specialty trade contractors, the last digit of

the six-digit NAICS code is zero and is not pertinent to the classification of

the industry. The Quarterly Census of Employment and Wages (QCEW)

program replaced the last digit of the NAICS code for specialty trade

contractors with a 1 for establishments engaged in residential work and a

2 for establishments engaged in nonresidential work. More information

on the QCEW program is available online at www.bls.gov/cew/home.htm.

8

 For more information on the weighted link-relative technique, see

the BLS Handbook of Methods, Bulletin 2414 (Bureau of Labor Statistics,

September 1992). Information is also available in the Current

Employment Statistics technical notes online at www.bls.gov/web/

cestn1.htm.

9

 Benchmarking is an annual reanchoring of the CES March samplebased employment estimates to the March full population counts

derived principally from the Quarterly Census of Employment and

Wages program. These population counts are much less timely

than sample-based estimates and are used to provide an annual pointin-time census for employment. More information on the CES

benchmark is available online at www.bls.gov/web/cestn1.htm.

10 Population counts are derived from the administrative file of

employees covered by unemployment insurance (UI) laws. All employers

covered by UI laws are required to report employment and wage

information to the appropriate State Employment Security Agency four
22 Monthly Labor Review October 2006

New Construction Employment Series

times a year. Approximately 97 percent of private employment within

the scope of the establishment survey is covered by UI. A benchmark for

the remaining 3 percent of employment, referred to as PNC employment,

is constructed from alternate sources.

11 The NAICS “other” employment group consists of unclassified

employment that is allocated proportionally among all industries.

12 The CES program annually realigns its sample-based estimates to

better reflect the most current universe counts of employment—a

process known as benchmarking. Comprehensive counts of employment, or benchmarks, are derived primarily from employment data

reported on unemployment insurance (UI) tax reports that nearly all

employers are required to file with State Employment Security

Agencies. At each level of industry detail, the difference between the

sample-based estimate and the universe count is referred to as the

benchmark revision.

13 The Quarterly Census of Employment and Wages program updates

each establishment’s industry classification every 3 years based on

information obtained through its Annual Refiling Survey. Each year

one-third of its universe of establishments are asked to verify or update geographic codes, ownership codes, and the primary business

activity of the establishment.

14 P-values range from 0 to 1.00, and in general, the smaller the

value, the more convincing the evidence to reject the null hypothesis.

15 The formula for the smoothness ratio is:

Smoothness ratio =

where

X = seasonally adjusted estimate for the experimental series,

Y = seasonally adjusted estimate for the control series, and

i = time t.

16 For 2003, the third quartile of percent absolute revisions for

industries with employment ranging from 200,000 to 1.2 million is

3.1 percent. Over a 2-year span (2002-2003), 75 percent of the fourdigit NAICS residential and nonresidential series had a benchmark

revision of less than 3.1 percent.

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