Academic journal article Monthly Labor Review

Concurrent Seasonal Adjustment for National CES Survey

Academic journal article Monthly Labor Review

Concurrent Seasonal Adjustment for National CES Survey

Article excerpt

The Current Employment Statistics (CES) survey, conducted by the Bureau of Labor Statistics, is a monthly survey of more than 400,000 business establishments. The CES program obtains payroll employment, hours, and earnings information and produces industry-based estimates for the Nation, States, and major metropolitan areas. The national CES estimates of employment, hours, and earnings are some of the most timely and sensitive economic indicators published by the Federal Government. Widely viewed as a key measure of the health of the economy, the estimates are closely tracked by both public and private policymakers alike.

Most CES data users are interested in the seasonally adjusted over-the-month employment changes as a primary measure of overall national economic trends. Therefore, accurate seasonal adjustment is an important component in the usefulness of these monthly data. While seasonally adjusted series go through several monthly revisions and an annual benchmark revision before they are finalized, the first published estimates are the most widely anticipated and analyzed. Thus, it is important to use the most efficient and reliable methods for seasonal adjustment of current months' data.

In the past, the CES program employed seasonal adjustment methodology that applied forecasted seasonal factors to the employment estimate. Twice a year, seasonal factors were forecasted for 6 months into the future and applied to the nonseasonally-adjusted estimates during the next 6 months. However, simultaneously with the CES survey's conversion to the North American Industry Coding System (NAICS) with the publication of May 2003 first preliminary estimates, the survey converted to concurrent seasonal adjustment. Under this methodology, new seasonal factors are calculated each month, using all relevant data up to and including the current month. This article compares the two seasonal adjustment methodologies, examines results from recent research evaluating each of them, and discusses some implications of the CES conversion to concurrent seasonal adjustment.

Background on CES estimates

One of the benefits of the CES program is the timeliness of its estimates. CES estimates are published each month after only 2 1/2 weeks of data collection. The primary deadline for data receipts, referred to as "first closing," is the last Friday of the reference month, and preliminary estimates are generally published on the first Friday following the reference month. In order to incorporate additional sample responses received after the primary deadline, each estimate undergoes two monthly revisions before being finalized. The secondary cutoff, or "second closing," is usually 3 weeks after the primary deadline, and the third deadline, or "third closing," is 3 weeks after the second. Therefore, for any given reference month, second-closing estimates are published the following month, and third-closing estimates are published 2 months afterwards.

CES estimates also undergo annual revisions called benchmarks. Each year, the sample-based estimates for the previous year are adjusted to universe employment counts derived from State unemployment insurance tax records. This adjustment constitutes the final estimate for all reference months in the benchmark period.

Customarily, the June CES publication incorporates annual benchmark revisions that include a recalculation of seasonally adjusted data for the most recent 5 years. After 5 years of seasonal adjustment revisions, figures are frozen. For example, the March 2002 benchmark revision, published in June 2003, provided revised seasonally adjusted data for 1998 through the first quarter of 2003. Beginning in 2004, the annual benchmark revision will be incorporated in February instead of June.

To seasonally adjust the estimates, the CES program uses x-12 ARIMA software developed by the U.S. Census Bureau. Under the old methodology, seasonal adjustment factors were recalculated semiannually, in April and November, and projected factors for the next 6 months were published in June and December of each year. …

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