James C. Franklin Office of Occupational Statistics and Employment Projections Division of Industry Employment Employment Outlook: Overview of Methods and Results

The BLS Projections Program n Develop long term projections of labor market information –labor force trends by sex, race or Hispanic origin, and age –employment trends by industry and occupation

The BLS Projections Program n Assess implications for employment opportunities n Assess effects of changes in Federal programs and policies n Disseminate findings to aid –career planning –education planning –policy formulation

The BLS Projections Program n The projections are published in a wide variety of formats for varied audiences: –Occupational Outlook Handbook –Monthly Labor Review articles –Occupation Outlook Quarterly articles –Special analysis bulletins

Who Uses the BLS Projections n Career counselors and students n Government agencies n Private consulting and research firms n Academic economists in U.S. and abroad n Politicians and the Media

BLS Projections Specifics n Annual estimates n National level of detail n Medium term years n Published every other year

Requirements for carrying out this type of projections n Large-scale economic data base n Extensive computer support –Statistical analysis capabilities –Data base management capabilities n An experienced staff

The BLS Projections Process: Component Models n Labor force n Macro economic activity n Input-Output model and derivation of industry output n Labor model n Occupational staffing pattern model

The BLS projections process: Information flows Labor Force Total and by age, sex, race, and ethnicity Aggregate Economy GDP, total employment, and major demand categories Occupational Demand Industry staffing patterns Industry Final Demand sales to consumers, businesses, and government Industry Employment Labor productivity, average weekly hours, w&s employment Industry Output Use and make relationships, total requirements tables Demographic, fiscal policy, foreign economies, energy prices, monetary policy Economic censuses, annual economic surveys, other data sources BEA benchmark- year input-output tables, BLS time- series estimates Population, labor force participation rate trends, category restraints Industry output, sector wage rates, technological change Staffing pattern ratio analysis, industry- specific studies, staff expertise

The Labor Force--What Is It n The labor force is comprised of those age 16 and over who: –are working at full- or part-time jobs, or –are unemployed but are actively seeking work n Labor force participation rate: –labor force / noninstitutional population

The Labor Force--How it is Projected n Use Census forecasts of population by age, sex, race, and ethnicity n Calculate historical labor force participation rates n Extrapolate these rates to the target year n Multiply the projected rates by population to calculate the projected labor force of each category

The Labor Force--What is Projected n By Age -- sixteen groups n By Sex n By Race and Ethnicity –White non-Hispanic –White Hispanic –Black non-Hispanic –Black Hispanic –Asian and other

Aggregate Economy--How We Project n DRI Comprehensive Quarterly Model –1000+ behavioral & identity relationships –280+ exogenous assumptions n Assumptions are provided to the model n Model is solved over the forecast period

Aggregate Economy--Key Assumptions n Demographic n Fiscal policy n Foreign economic activity and inflation n Energy n Monetary policy

Aggregate Economy--Key Results n Real GDP, level & rate of growth n Aggregate employment, by household & establishment

Aggregate Economy--Key Results n Major demand components of GDP –Personal consumption expenditures –Producers’ durable equipment –Nonresidential construction –Residential construction –Change in business inventories –Exports of goods & services –Imports of goods & services –Government purchases

Aggregate Economy--Evaluation Factors n GDP rate of growth n Civilian unemployment rate n Labor productivity growth rate n Inflation n Federal budget deficit/surplus n Foreign trade deficit/surplus Are the results meaningful? Are they consistent with the assumptions? If not, rethink the assumptions and try again

Why BLS no longer produces High and Low alternatives to the projections n Users were confused: which one was the right one for their use? n Wrongly interpreted as being confidence intervals n Alternative development implied a sensitivity analysis of macro results n So now BLS makes a separate macro sensitivity analysis

Industry Demand--What is Projected n Commodity final demand –First disaggregate GDP demand components by product class –Then, within each class, determine the commodity content (192 commodities) –Result: detailed final demand bills-of-goods

Interindustry 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 ä ää ä ä ä

Industry Demand--What is Projected n Total requirements coefficients –Scale rows to affect product sales coefficients across all industries –Modify columns to affect changes in material input requirements for specific industries n Recalculate industry & commodity total requirements tables

Industry Demand--What is Projected n Combining the estimates of intermediate and final demand results in the total output by industry and commodity necessary to produce a specific level of GDP n Industry output (rather than final demand) is the key determinant of employment needs

Projecting Industry Employment Total hours for each industry derived as: H i =  (time, output i, real wage j ) n Average annual hours are well-behaved: AAH i = g(time, UR) n Industry employment determined by identity: E i = H i / AAH i n Initially controlled to aggregate employment control from macroeconomic model

Occupational Demand--What n Industry by occupation staffing pattern matrix: –260 industries –513 occupations n Distributes wage & salary employment in each industry to all occupations used by that industry

Occupational Demand--What n A separately determined distribution of self-employed and unpaid family workers by occupation completes the picture of occupational demand in the economy n Each occupation then assigned to a growth category

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

Replacement Demand Total job openings made up of: –new jobs created –replacement needs for those who have died retired moved to another occupation n Replacement needs often outweigh new job creation as a source of job growth

Reviewing the Projections n Initial estimates are reviewed internally by the entire staff of OEP, resulting in bottom-up feedback to each stage of the process. This process has proven to be: –Analytical rather than mechanical –Cost-effective –Pragmatic

Reviewing the Projections n Secondary review involves other program offices within the BLS: –Employment & Unemployment Statistics –Productivity & Technology –Commissioner of BLS

Reviewing the Projections n Result: a consistent set of projections at all levels of detail that has undergone extensive scrutiny by all analysts in the Office, as well as detailed review by other BLS offices n Sensitivity analyses allow the user to evaluate major assumptions

Employment Outlook:  Labor force n Economic growth n Industry employment n Occupational employment

Population and labor force will continue to grow Millions PopulationLabor force Source: Bureau of Labor Statistics projected

Labor force growth will remain steady PopulationLabor force Percent change Source: Bureau of Labor Statistics projected

Employment Outlook: n Labor force  Economic growth n Industry employment n Occupational employment

A healthy economy is projected through 2010 Source: Bureau of Labor Statistics Selected economic variables, annual growth rates GDPProductivity , Projected , Projected

The projections assume a 4 percent unemployment rate Source: Bureau of Labor Statistics Percent Unemployment , assumed

Personal consumption expenditures (PCE) account for most of GDP PCE Imports ExportsInvestmentGovernment Source: Bureau of Labor Statistics Percent

Employment Outlook: n Labor force n Economic growth  Industry employment n Occupational employment

Service-producing industries continue to lead employment growth Source: Bureau of Labor Statistics Millions of nonfarm wage and salary jobs Goods-producingService-producing

Services and retail trade account for most job growth Source: Bureau of Labor Statistics Thousands of nonfarm wage and salary jobs, projected Service Producing Goods Producing

Projected employment growth in services is concentrated Source: Bureau of Labor Statistics Thousands of nonfarm wage and salary jobs Engineering and management services Total: 12,893 Social services All other services Health services Business services 5,064 1,260 1,225 2,505 2,838

The 10 fastest growing industries are service-producing Computer and data processing Residential care Health services, nec. Cable and pay television Personnel supply Warehousing and storage Water and sanitation Veterinary Landscaping and horticulture Miscellaneous business Source: Bureau of Labor Statistics Percent change, projected

Eight industries account for half of projected job growth Source: Bureau of Labor Statistics Thousands of wage and salary jobs Personnel supply services Retail trade, except eating and drinking places Offices of health practitioners Miscellaneous business services Construction Eating and drinking places Computer and data processing services State and local government education

Employment Outlook: n Labor force n Economic growth n Industry employment  Occupational employment

Professional and related occupations had the most jobs in 2000 Source: Bureau of Labor Statistics Millions of jobs

All major occupational groups are projected to increase Percent change, projected Source: Bureau of Labor Statistics

Professional occupations account for more than 3 out of 10 new jobs Source: Bureau of Labor Statistics Thousands of jobs, projected Total: 22,160

Job openings from replacement needs exceed those from employment growth Source: Bureau of Labor Statistics Millions of jobs, projected