Industry Employment Projections Methodology
Industry Employment Projections estimate changes within an industry over time. The projections are based on the State or local area's past industry employment trends and are refined by a review of current economic developments that affect employment within each industry. Base year data, the date for the beginning year of the projection period, are a "snap-shot" of employment at a point in time. Preliminary employment projections are produced using various economic models. The methods and economic models are provided to all state Labor Market Information programs to insure consistent methodology and outcomes across the nation. Using these methods, analysts review preliminary industry employment projection numbers and make adjustments based on local area and State economic developments that may occur during the projection period.
Each employer in California is classified by its primary economic activity using the North American Industry Classification System (NAICS) coding and the county where the employer is physically located. The Employment Development Department (EDD) uses the NAICS to organize and track employment by industry and geographic area and construct the historical employment data series used to develop industry projections.
The State and sub-state area Long-Term projections are for a 10-year period. The projections are revised every two years to maintain currency and incorporate economic changes that occur in the State and local areas. Statewide Short-Term projections are for a two-year period and are revised annually.
- Using Industry Employment Projections Data
- Projection Estimates Include
- Projections of Employment
- Economic Assumptions
- Other Considerations
Using Industry Employment Projections Data
The Industry Employment Projection tables are an excellent source of information to estimate job opportunities by industry. Projections of Industry and Occupation employment can be used to assess the need for job training programs and gain an insight into future employment trends.
When using projections data, users should keep in mind:
- These data are estimates. They were developed based on the assumption that historical trends will continue into the future. However, events that are impossible to predict may occur during the 10-year projection period. Events such as major business closures or openings and natural disasters can all have a major impact on employment levels.
- Projections data are one source of information. Use other more recent sources of local economic data to corroborate the projection data. This information may be found in other documents such as those published by the EDD's Labor Market Information Division (LMID), local and regional newspapers, local chambers of commerce, or local economic development agencies.
- Short-Term Projections
Short-term (2 year) projections are based on quarterly average employment levels by industry for the base and target quarters. These averages may reflect seasonality in some industries.
- Long-Term Projections
Long-Term (10 year) projections are based on annual average employment levels by industry for the base and target years. Keep in mind that the annual average employment levels for seasonal industries such as agriculture, construction, retail sales, or recreation could vary significantly from the seasonal peak period for these types of industries.
Many industries have a large number of individuals who are self-employed. Examples include industries such as Construction, Real Estate, and Personal Care Services (Barber Shops and Beauty Salons). These individuals will be included in the estimates for Self-Employed workers, not the specific industries in which they work. The Self-Employment data are derived from the Bureau of Labor Statistics (BLS) Current Population Survey (CPS).
Projection Estimates Include:
- Nonfarm employment by major industry sector.
- Farm employment in establishments engaged in growing crops, raising animals, harvesting fish and other animals from a farm, ranch, or natural habitats. This does not include logging.
- Self-employed workers who work for profit or fees in their own business, profession, trade, or farm. The estimated and projected employment numbers contain all workers who are primarily self-employed and wage and salary workers who hold a secondary job as self-employed workers. Examples of self-employed workers are: Farmers and Ranchers, Door-to-Door Sales Workers, Writers and Authors, and any occupation that customarily has self-employed workers.
- Unpaid family workers who work without pay for 15 or more hours per week on a farm or in a business operated by a member of the household to whom they are related by birth or marriage.
- Private household workers employed as domestic workers whose primary activities are to maintain the household. Over 90 percent of all private household workers are concentrated in three occupations: (1) Personal and Home Care Aides, (2) Child Care Workers, and (3) Maids.
Projections of Employment
Projections of employment by industry are the first phase in the employment projection process. A projection of employment level is made for each industry using historical data and current information about the economy. These projections become a primary data source used to project changes in occupational employment. Following is a description of data sources and the industry employment projection process.
Principal Data Sources
The EDD collects payroll data from all private employers and government entities covered under the Unemployment Insurance, Disability Insurance, and Personal Income Tax programs.
- Current Employment Statistics (CES)
The CES data are the official industry employment series for the State, Metropolitan Statistical Areas, and counties. It is the primary historical industry data source for industry projections. The EDD uses a sampling of private employers and government entities that are surveyed each month to estimate employment. The series is monitored on an ongoing basis and benchmarked each year to the universe of industry employment reflected in the Quarterly Census of Employment and Wages. The CES historical employment series includes a combination of varied NAICS code aggregations.
- Quarterly Census of Employment and Wages (QCEW)
The QCEW data represent the universe of employment by industry and county. The EDD collects the data as reported to employment tax programs, most notably the Unemployment Insurance Tax program. The data are used to benchmark the employment estimates made in the CES employment series and to enhance the industry picture in cases when the CES employment estimates do not provide the level of industry detail necessary to develop industry projections for the State and local areas.
Analysts follow a nationally specified methodical process to develop industry projections. For the State and each local area, the analyst will:
- Construct a historical industry series for each industry located in the area using the CES and/or QCEW employment data sources. The final year of the historical data becomes the Base Year of the projection period.
- Process the historical times series through BLS projections software that utilizes a variety of economic models to produce the initial Target Year projections by industry.
- Review the initial projection for each industry and select the best economic model's projection based on prior historical growth rates, knowledge of the economy, and comparisons to other forecasts.
- Consult with the experts. The LMID's economist reviews the State industry projections, as well as the state Department of Finance, and the LMID's local labor market consultants review local area projections. The labor market consultants use their knowledge of the local economy, as well as solicit the input of local experts and recommend adjustments to the projections where they think it is appropriate.
- Incorporate reviewers' recommended changes as appropriate and finalize the industry projections to publish on LMID's Web site.
The industry projections in this report are based on the following assumptions:
- The institutional framework of the U.S. economy will not change radically.
- Recent technological and scientific trends will continue.
- The long-term employment patterns will continue in most industries.
- Federal, state, and local government agencies are expected to operate under budgetary constraints.
- No major events will occur that will significantly alter the industrial structure of the economy, the occupational staffing patterns, or the rate of long-term growth.
- Population growth rates and age distributions will not differ significantly from Department of Finance projections presently available.
- Attitudes toward work, education, income, and leisure will not change significantly.
Identifying future industry trends helps economic development professionals foster compatible growth and promote State and local area strengths. Local government agencies, non-profit agencies, researchers, and other interested parties use future industry trends to formulate plans and proposals. Job seekers and professionals who provide counseling and/or job placement may use the industry projections to learn about employment opportunities in various industries. However, it is important to keep in mind that projections are just one planning tool and that the estimates are based on information available at the time the projections were made.
- If an industry sector shows a decrease in future employment, it may be that only one or two of its components are experiencing the decline and other components are still expected to hire new workers. It is best to investigate all the components within the industry. For example, the retail trade sector has several components: building materials and garden supplies, general merchandise stores, food and beverage stores, and motor vehicle parts dealers.
- Although an industry may be stable and is not expected to grow, there may still be opportunities for employment in that industry. All industries have replacement needs. Individuals change or leave their jobs permanently for various reasons. Replacement needs, especially in industries that require lower-skill levels, generate frequent openings even though there is little or no growth.
- Industries have varying levels of growth. Industry sectors such as retail trade or the services industries may grow at different rates.
- Geographical differences also account for differing employment opportunities. Individuals planning to relocate from one area of the state to another need to keep in mind that that small rural counties will not have the same employment possibilities as the larger metropolitan areas.
For additional information on economic conditions in a particular local area, contact the LMID's local labor market consultants who are located in the community. They are knowledgeable about the economic activities within the areas they serve. Other resources include the local EDD's Offices that provide job services and One-Stop locations that offer additional publications on labor market information.
Revised: July 2010
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