Background on LMI Concepts

1. Background on LMI Concepts Rod Fortran,August6, 2008

2. Background on LMI Concepts Each month, the New York State of Labor produces and publishes estimates for two principal data series: • Current Employment Statistics survey (CES) (a.k.a. the "establishment survey") • Local Area Unemployment Statistics (LAUS) (a.k.a. the "household survey")

3. Background on LMI Concepts Comparing the CES and LAUS Series

4. Background on LMI Concepts Comparing the CES and LAUS Series

5. Background on LMI Concepts What is Non-Farm Payroll Employment (a.k.a. establishment survey)? • Non-Farm Payroll Employment data are based on the number of employees on firms' payrolls during the week including the 12th of the month. • Farm jobs are excluded because of their seasonal nature, which can skew total employment figures. • Data pertain to where those jobs are located (place of work). • About 18,000 business establishments in New York are surveyed monthly. • The data are published monthly by the New York State Department of Labor.

6. Background on LMI Concepts How are Non-Farm Payroll Employment data revised (a.k.a. “benchmarking”)? • Job data for the previous 18 months are revised at the end of each year for all states and the nation, as more complete information becomes available from employer unemployment insurance tax records. • March 2005 is called the “reference month” and is the latest month for which estimates will not be revised in the future. • Estimates for April 2005 and later months are still subject to revision in the next round of annual revisions in early 2007.

7. Background on LMI Concepts How is Non-Farm Payroll Employment Classified by Industry? • The North American Industry Classification System (NAICS) serves as the basis for classifying business activity in the U.S. • NAICS codes are organized hierarchically. The highest category, Domain, is divided into Goods-Producing and Service-Providing. • Supersectors, such as Leisure & Hospitality, break down into sectors, such as Accommodation & Food Services, and ultimately branch out into Industries, such as Hotels.

8. Background on LMI Concepts NAICS Structure

9. Background on LMI Concepts NAICS Structure

10. Background on LMI Concepts NAICS Structure

11. Background on LMI Concepts What is seasonally adjusted jobs data, and why do we examine it? • Many economic series have seasonal patterns, which means they tend to occur at the same time each year. Examples include: • Construction employment declines in winter; • Tourism employment rises in summer; • Retail employment peaks in December. • Because of such seasonal factors, simply looking at monthly employment statistics may not be enough to reveal true underlying trends. Seasonal adjustment eliminates seasonal fluctuations in monthly employment data, thus permitting comparisons of data from one month to data from any other month.

12. Background on LMI Concepts What is seasonally adjusted jobs data, and why do we examine it? As shown in the chart below, leisure & hospitality sector employment peaks in the summer and subsequently decreases in the fall. Seasonal adjustment smoothes out this seasonal fluctuation, thereby revealing the underlying trend in the data. Not Seasonally Adjusted Employment in 1000s Seasonally Adjusted

13. Background on LMI Concepts What are seasonally adjusted jobs data, and why do we examine it? • In New York, seasonally adjusted jobs data for each of the 12 broad industry supersectors (e.g. financial activities, manufacturing, government) are independently adjusted. • The seasonally adjusted private sector job count is the sum of seasonally adjusted jobs data for all industry supersectors except government. • The seasonally adjusted total non-farm job count is the sum of seasonally adjusted jobs data for all industry supersectors including government.

14. Background on LMI Concepts What is Local Area Unemployment Statistics (LAUS) (a.k.a. household survey)? • Statistics are published for states, metro areas, counties and places with population of 25,000 or greater. • Estimates are calculated by a statistical model with the following inputs: • Monthly Current Population Survey of households that interviews about 3,000 households in NYS. • Monthly Current Employment Statistics survey of businesses. • Unemployment insurance claims data.

15. Background on LMI Concepts What is Local Area Unemployment Statistics (LAUS) (a.k.a. household survey)? • Interviewees are asked by the CPS whether during the week including the 12th day of the previous month (the reference week) they: • worked (employed); • did not have a job, but were actively searching for work (unemployed); • did not work and were not actively searching for work (not in labor force).

16. Background on LMI Concepts How are Labor Force and Unemployment Rate Calculated? • Labor force = Employed + Unemployed • Unemployment Rate= Employed / Labor force • The Unemployment Rate may: • rise because—someone either loses a job or enters the workforce and starts looking for a job. • fall because—someone either finds a job or drops out of the labor force (stops looking actively for work or moves out of the area.)