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Research & Analysis Bureau - Montana Department of Labor & Industry

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What the Heck is "Benchmarking"?

Thermometer photo

Eagle-eyed labor force watchers might have noticed that year after year, right around March, the unemployment rate graph gets somewhat less dramatic. That spiky little line you've been watching grow for a year has suddenly smoothed out. The general trend is the same, but the month to month fluctuations are diminished. Why does this happen?

Each year, we go through a process known as benchmarking that corrects the previous year's estimates with more accurate numbers based on actual job counts. The process is, of course, a lot more complex than this simple explanation. Luckily, the U.S. Bureau of Labor Statistics has a more thorough explanation. In their article "Recalibrating the Jobs Thermometer," the BLS explains:

"Each month, the establishment program surveys a sample of businesses and governments around the country. The survey asks how many people worked or received pay for the pay period that included the 12th of the month. While the establishment sample is large, covering about one-third of all nonfarm jobs, the employment changes reported each month are still subject to revisions. Monthly revisions result from more establishments reporting their numbers or correcting previous reports, and from updated information about seasonal employment patterns.

The establishment survey also benefits from another source of data, the Quarterly Census of Employment and Wages. That is a nearly complete count of all establishments, although it is available with a delay of about 6 months. A full count of employment helps us in several ways. We use the data to measure the error associated with the establishment survey. This way data users don’t have to guess how accurate the monthly employment data are. We have a stat for that! In case you are wondering, the data are very accurate. Annual benchmark revisions (which I will explain in a moment) have averaged only 0.3 percent in absolute terms over the past 10 years.

Besides measuring error, once a year we realign the sample-based estimates with the full count of employment. We call this “benchmarking.” This realignment makes sure the employment levels do not stray too far from the “truth” over time. (For several reasons that I won’t go into right now, the establishment survey employment totals will not exactly equal employment totals from the full counts. If you really want to know the details, you can read more about benchmarking, but remember I tried to spare you.)

During this annual benchmarking, we also introduce other changes to the survey. Sometimes we update the industry classification, like we will this year. We also use new information to update the statistical model that accounts for business births and deaths. We review the establishment sample for size, coverage, and response rates, and we may drop some series if the data quality doesn’t meet our standards. We also update the models and information used in seasonal adjustment."

To read the full article, click the link: "Recalibrating the Jobs Thermometer."

Revised statewide numbers for the Local Area Unemployments Statistics (LAUS) program will be released February 27th and revised Current Employment Statistics (CES) data will be released with our March 12th press release. 

Categories: Labor Market Info-101

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