Industry Employment Projections Methodology

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Industry employment projections ("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. Projections are produced using methods and tools provided by the Projections Managing Partnership (PMP). The PMP is a national consortium of state labor market information offices funded by the U.S. Employment & Training Administration that maintains the national infrastructure for the production of projections to insure consistent outcomes across the nation.

Each employer in California is classified by its primary economic activity using the North American Industry Classification System (NAICS) code 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 local area long-term industry employment projections are for a 10-year period and are revised every two years. Statewide short-term industry employment projections are for a two-year period and are revised annually.

Using Industry Employment Projections Data

Projections are a source of information to estimate job opportunities by industry and can be used for:

  • Career Decisions & Guidance
  • Strategic Planning
  • Economic Development
  • Policy Making
  • Training & Education
  • Workforce Investment Planning
When using projections data, users should keep in mind:

  • These data are estimates. Projections data are developed based on the assumption that historical trends will continue into the future. However, events that are impossible to predict may occur during the projection period. Events such as major business closures or openings and natural disasters can all have a major impact on employment levels.

  • Projections are one source of information. It is recommended to supplement the projection data with other sources of economic 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.

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Industry Projections 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 work for profit or fees in their own business, profession, trade, or farm. The estimated and projected employment numbers contain all primarily self-employed workers, as well as wage and salary workers who hold a secondary job as self-employed workers. Many industries have a large number of individuals who are self-employed. 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 U.S. Bureau of Labor Statistics (BLS) Current Population Survey (CPS).

  • Private household workers employed as domestic workers whose primary activities are to maintain the household.

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Projections of Employment

Projections of employment by industry are the first phase in the employment projection process. Projections are created 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 the principal data sources and the 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 (QCEW). 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.

The Process
The PMP Projections Suite software lies at the core of the projections process. This software provides the tools and national information necessary for states to produce their projections. For the state and local areas, the analyst will:

  1. Construct a historical industry series for each industry located in the area using the CES and/or QCEW employment data sources.

  2. Process the historical time series through the projections software that utilizes a variety of economic models to produce the initial target year projections by industry.

  3. 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.

  4. Consult with the experts. The EDD's economist reviews the state industry projections, and the LMID's local labor market consultants review local area projections. The consultants use their knowledge of the local economy, and solicit the input of local experts to recommend adjustments to the projections.

  5. Incorporate recommended changes as appropriate and finalize the projections for public dissemination.

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Industry Employment Projections

The projections are located in the EDD Data Library and features the following information:

  • Employment is displayed for the base and projected years.
  • Employment Change is displayed in “Numeric Change” and “Percentage Change”. Numeric change is the net difference between the base and projected year employment and reflects job growth. Percentage change measures the projected rate of change of employment in an industry.

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Economic Assumptions

The projections 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 California's Department of Finance projections presently available.

  • Attitudes toward work, education, income, and leisure will not change significantly.

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Other Considerations

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 produced.

  • 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. Individuals change or leave their jobs permanently for various reasons. Therefore, industries that require lower-skill levels, generate frequent openings even though there is little or no growth.

  • 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 region, contact the LMID's local labor market consultants.

Revised: April 2018

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