1. An Update on Business Employment Dynamics
Kevin Cooksey
Chief, State Operations and Frame Research Branch
Business Employment Dynamics
QCEW Program
Bureau of Labor Statistics
AUBER Conference
October 24, 2016
Fayetteville, AR

2. Outline What is the BED and what does it measure?
BED as a measure of entrepreneurship
New data on BED by firm age and size
QCEW data users survey

3. What is the BED?
Data Source: Longitudinal, linked microdata from the Quarterly Census of Employment and Wages (QCEW)
QCEW microdata consist of employment and wage reports by business establishments, and are collected by state unemployment insurance (UI) programs
BLS staff review UI administrative data for outliers and longitudinal linkages (including mergers/acquisitions)
Businesses are assigned a unique numeric identifier when they are loaded to the Longitudinal Database (LDB) that allows us to track them over time

4. BED Scope
BED Scope: U.S. private sector, excludes government and private household employees
~117.4 million employees
~7.6 million establishments

5. What does the BED measure?
BED measures changes in employment at the establishment level on a quarterly basis
Focus on establishments that gain or lose jobs over the quarter
Approximately 50% of establishments report no change over the quarter
Changes in employment are measured as:
Gross job flows: gains and losses
Openings and closings, births and deaths
Available by state, industry, age, and size
Economic Concepts: Job churn and creative destruction

6. Who Uses the BED data?
Federal Reserve: FRB uses BED data on job creation and job destruction; Regional Fed Banks (Richmond, Philadelphia, etc) use BED data for regional analysis
State Labor Market Information (LMI) Bureaus: use BED data to compare state and national business cycle trends
Small Business Administration (SBA): uses BED data tabulated by size of firm to measure job creation and destruction by small businesses
National and Local Media: use BED job flow data for new and existing businesses to explain and discuss economic trends

7. BED Data Series Available
Entrepreneurship Measures
Birth/Death
Firm & Establishment Age & Survival
Job Creation and Destruction Measures
National :Total Private, NAICS Sector, NAICS Subsector
State: Total Private, NAICS Sector
Firm & Establishment Size Measures
Small (1-49 emp.), Medium ( emp.), Large (250+ emp.)
Nine OMB-suggested Size Classes

8. Timely, Accurate, Relevant
Available 7 months after the reference quarter
1st Quarter 2016 data will be released on November 9th:
Accurate
Zero sample error
Multiple layers of review to ensure data accuracy
Minimal Revisions
Relevant
Let me show you some examples

9. Gross Job Gains and Losses
Notice the reduction in dynamism.
Gross job gains
Gross job losses
Left axis in thousands, Total private sector, Seasonally adjusted
Source: U.S. Bureau of Labor Statistics Note: Shaded area represents NBER defined recession period

10. Components of Gross Job Gains and Losses
Expansions
Contractions
Expansions and contractions make up the majority of employment dynamics.
Openings
Closings
Left axis in thousands, Total private sector, Seasonally adjusted
Source: U.S. Bureau of Labor Statistics Note: Shaded area represents NBER defined recession period

11. BED Entrepreneurship Measures

12. The Decline of Job Reallocation or “Churn”- Rate
Job Reallocation Rate (%) = Total jobs created plus total jobs destroyed, divided by total jobs in the economy.

13. Yearly Startups and Resulting Employment
Over time, the number of startups has remained relatively stable while the jobs created by those startups has declined. The result is a lower average establishment “birth weight.”

14. Age data: Startups Are the Major Source of Net Employment Growth in the U.S.

15. Age and Survival Matrix

16. The Survival Curve: Survival Rates of Establishments by Birth Cohort
On average 78.4% of businesses will survive the first year, and by the end of the fifth year less than half of all businesses will have survived.
Source: Bureau of Labor Statistics, Business Employment Dynamics

17. BED by Age and Size

19. How much do older firms contribute to job growth?
Firms 10 years or older created 800,000 jobs, or 29 percent of the total 2.7 million net employment gain in the year ending March 2015.

20. How much do startup firms contribute to job growth?
In the year ending March 2015, startup firms—firms less than 1 year old—created 1.7 million jobs or 60 percent of total employment growth. More than half these jobs were from firms with fewer than 10 employees.

21. How does the age or size of the firm affect the rate of business closures?
In 2015, 788,000 establishments closed.
55 percent were from firms 10 years or older
16 percent were from firms 5 to 9 years old
28 percent were from firms less than 4 years old
Of the establishments that closed from March 2014 to March 2015, 91,000 of them, or 12 percent of the total, had 500 or more employees.

22. Notable Uses Paul Davidson, USA Today
Business start-up activity is surging. Here's why.
“The number of business start-ups with at least one employee… is also rising. There were 398,000 additional employer businesses that were a year old or younger last year, up 7% from 2014 and the most since 2008, according to the Labor Department”
Source:

23. Conclusion Tremendous job churn not seen in net job data
Gross job changes at expansions and contractions larger than at openings and closings
Gross job gains and losses have business cycle properties
A wealth of data in the recently released BED by Age and Size

25. Chief, State Operations and Frame Research Branch
Kevin Cooksey
Chief, State Operations and Frame Research Branch
Business Employment Dynamics
QCEW Program
Bureau of Labor Statistics