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The Future Ain't What It Used to Be

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Times have changed.

There was a time when most workers entered an occupation at a young age and stayed in that occupation until retirement. This situation hasn't been typical of American workers for quite some time, yet until recently, job projection methodologies still operated as if multiple major career changes were a rarity. The past methodology, known as the “replacements” methodology, was developed in the early 1990s and primarily captured job openings from retirements and deaths, but didn't account for the frequent career changes of the more dynamic workforce we see today.

The new projections methodology, known as the “separations” methodology, uses two entirely separate calculations to capture both the workers leaving the workforce entirely (Labor Force Exits) and those leaving a job to work in a new occupation (Occupational Transfers). Both calculations use historical data from the U.S. Census Bureau's Current Population Survey (CPS). Transfers data come from the CPS Annual Social and Economic Supplement, while exits data come from the monthly CPS numbers. While the data are manipulated in different ways, both calculations use similar worker characteristics to determine the chances of an exit or transfer. For instance, the age of the worker is a huge factor, since it is overwhelmingly the older workers who exit the labor force due to retirement. Education level is also an important factor, because occupational transfer patterns vary based on a worker's highest level of education. Other worker characteristics considered in the calculations include sex, race, ethnicity, citizenship, full/part-time status, self-employment status, industry, and even the occupation type.

Graphic illustrating the difference between replacements methodology and separations methodology

How will the new methodology affect the projections numbers?

In the past, total openings was presented as the sum of openings due to replacements (workers leaving a job) and openings due to newly created jobs. The new methodology replaces the "replacements" category with two more specific categories: openings due to occupational transfers, and openings due to labor force exits. The sum of newly-created jobs, occupational transfers, and labor force exits now make up "Total openings."

However, the change goes beyond simply splitting "replacements" in two. This is a whole new way of doing things, and it has resulted in numbers that are drastically different from the ones we're used to seeing. The number of openings is significantly higher than in the past (61,710 openings compared to 17,500). Without context, it would appear that the entire economy has experienced a tremendous upheaval even though it hasn't. That is why it is important to be aware of methodological changes.

The new methodology should lead to more accurate and useful projections data, but changing the whole methodology does come with a downside. Because the results are so different, projections from the past that use the replacements methodology should not be compared with projections derived from the separations methodology.

For a more complete (and technical) explanation, please visit the US Bureau of Labor Statistics website at: www.bls.gov/emp/documentation/separations-methods.htm.

Categories: Montana Labor Market Blog

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