Sample 1 - State of California
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Methodology for Generating Labor Force Data (Continued)

  CA and LA-LB-Glendale MD - Time Series Models
  Substate Labor Force Data - LAUS Method
  Sub-County Areas - Census Share Method
  Cautions When Using These Data
CA and LA-LB-Glendale MD - Time Series Models

In January 1996, time series models replaced the Current Population Survey (CPS) as the basis for the estimates of labor force data (labor force, employment, unemployment, and the unemployment rate) for California.  In January 2005, the LMID revised data back to 1976 using the new time series models.  The models cover two areas of the State:  the Los Angeles-Long Beach-Glendale Metropolitan Division (MD) and the "Balance of California" (i.e., the rest of California).  The results are added together to derive state-level data.

The time series models consist of two models for each area (Los Angeles-Long Beach-Glendale MD and Balance of California):
  • one estimates the unemployment rate and
  • the other estimates the civilian employment-to-population ratio
With these data and estimates of population change, employment, unemployment, and labor force are calculated. The models estimate ratios (employment-to-population and the unemployment rate) rather than the employment and unemployment levels because these ratios are easier to estimate than specific levels.

The unemployment rate model uses the relationship between the monthly Unemployment Insurance (UI) claims data and the CPS unemployment rate.

Flexible trend and seasonal components are included to account for movements in the CPS rate that are not reflected in the historical UI claims series.
  • The seasonal component reflects, for example, movement or changes in new entrant unemployment (typically teenagers with no work experience who can be unemployed but not usually eligible to file a UI claim).
  • The trend component adjusts for systematic differences, such as the change in the relationship between claims and the unemployment rate during different parts of the economic cycle.
The employment-to-population model uses the relationship between the ratio of the monthly Current Employment Statistics Survey (CES) employment to the population and the ratio of CPS employment to the population.

The model also includes trend and seasonal components to account for movements in the CPS not captured in the CES series.  The seasonal component accounts for the seasonality in the CPS not explained by the CES (for example, agricultural employment movement), while the trend component adjusts for long-run systematic differences between the two series (for example, during expansions, the CES grows faster than the CPS).

Under the time series models for the Los Angeles-Long Beach-Glendale MD and the Balance of California, the previous month's estimates are revised.  State monthly model estimates are controlled using "real-time" benchmarking to the national monthly labor force estimates from the CPS.  This reduces the regular annual revisions at the end of the calendar year to the state unemployment and unemployment series.

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