Department of Labor and Regulation

Title - Labor Market Information Center

Employment Projections - Methodology

Executive Summary

The industry and occupational employment forecasts presented on this website begin with a 2010 base year level projected to the year 2020. The projections are designed to:

  • Identify industries in which job openings are expected to occur.
  • Identify the state's rapidly-growing, stable or declining industries and occupations.

Recommended Uses of the Projections Data

  • Planning for future training needs
  • Analyzing future industry and occupational needs
  • Aiding workforce recruiting efforts
  • Analyzing occupational supply/demand

The projections are prepared every two years and are NOT updated between publication years. During the projections process, the past round of industry projections are reviewed and adjusted as necessary to reflect events that have recently occurred or are anticipated to occur during the projections period, based upon the availability of reliable and quantifiable data.

The projections should be used with other sources of information when making important decisions about business expansion, educational program development and career choices.

Note: Terms in bold are further explained in the glossary at the end of this document.

Assumptions & Limitations

The projections reflect studies of past and present industrial trends. They illustrate what is likely to happen, barring major changes from past trends. These projections are based largely on the same major economic assumptions the U.S. Bureau of Labor Statistics uses to develop national projections. These assumptions are:

Certain fundamental conditions will prevail throughout the projections period in the institutional framework of the U.S. and state economy; fluctuations in economic activity due to the business cycle will continue to occur.

Recent technological and scientific trends will continue.

Attitudes toward work, education, income and leisure will not change significantly; for example, the average workweek will not change markedly.

Population growth rates will not differ significantly from the U.S. Census Bureau data presently available.

No major events, such as war or other catastrophic events, will occur that will significantly alter the industrial structure of the economy, the occupational staffing patterns or the rate of long-term growth.

The projections are not intended to be precise point estimates of employment for each industry or occupation. It is unlikely that the projections data will precisely predict actual employment developments due to unforeseen state, national and international trends and policies. However, the basic trends should prove accurate and aid in successful decision making. Users should view the projected worker estimates as indicators of relative magnitude and direction rather than estimates of absolute values and use the data as a starting point when studying expected occupational employment levels.

Methodology

Industry Projections

The first step in the employment projections process involves the development of industry projections. The future employment in individual industries is the primary determinant in projecting occupational demand, because each industry has a unique occupational structure.

To begin the process of developing industrial projections, a "total employment" time series is constructed. The series is assembled at the four-digit North American Industry Classification System (NAICS) level, based on data collected from business establishments through the Quarterly Census of Employment and Wages (QCEW) program and supplemented with employment data from the Current Employment Statistics (CES) program, the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS). The series contains traditional wage and salary employment as well as self-employed and unpaid family workers, farmers and farm laborers.

Estimates of presumed non-covered (PNC) employment collected via a survey are utilized in creating historical staffing patterns for religious organizations, schools and other establishments that are presumed not to be covered by unemployment insurance. After edits and adjustments, the total employment time series serves as the input for the initial industry projections.

In order to produce projections and promote consistency across 50 states, South Dakota utilizes the Long-Term Employment Projections System, a national standard which was developed by a consortium of states working in cooperation with the Employment and Training Administration of the U.S. Department of Labor. The system provides the capability to perform projections incorporating accepted statistical methods and techniques. Industry employment projections are developed through shift-share, time series, and regression model analysis. Once the initial industry projections are completed, results are reviewed and adjusted as necessary to reflect events that have recently occurred or are anticipated to occur during the projections period for which reliable and quantifiable data are available.

Micro-Matrix: Staffing Patterns for Industries

The second step in the employment projections process involves the micro-matrix, a table arraying occupational staffing patterns for each industry. The matrix encompasses more than 700 detailed occupations cross-classified by more than 300 four-digit NAICS industries.

The main component in the construction of the micro-matrix is the Occupational Employment Statistics (OES) survey data. The OES survey, conducted by the Labor Market Information Center in cooperation with the BLS, is a semi-annual survey whose sample is based on establishments in the nonagricultural wage and salary sectors of the economy. Designed to provide current estimates of occupational employment for each industry, the OES sample is surveyed over a three-year rotating cycle. For example, out of a sample size of approximately 6,500 surveys, approximately 2,100 establishments received surveys in each year of the survey cycle, including years 2008, 2009 and 2010.

Following a review and minor modifications, staffing pattern data collected from the most recently completed OES survey comprises the nonfarm wage and salary micro-matrix for the base year. Consistent with the "total employment" approach, additional data are used to supplement areas not covered by the OES survey. Occupational staffing patterns or employment totals for agricultural workers, self-employed and unpaid family workers are added to the cross-industry wage and salary occupational employment totals.

Occupational Projections by Industry

Thirdly, once the total employment micro-matrix is complete, the industry projections created during the first step are merged with the micro-matrix results from the second step. The employment projections for each three-digit industry are applied to the appropriate micro-matrix ratios to derive occupational projections by industry. Another important national component used in developing South Dakota occupational projections are BLS change factors, which are coefficients developed to account for shifts, or changes, in industry staffing patterns that may occur over time. The development of these factors begins with the review of historical data to identify trends. Factors underlying these trends are then identified through analytical studies of specific industries and occupations, technological change, and a wide variety of other economic data. Then, judgments are made as to how the pattern will change in the future. Factors underlying this change are numerous, including technological developments affecting production and products, innovations in the ways business is conducted, modifications of organizational patterns, responses to government policies, and decisions to add new products and services or stop offering old ones. The change projected for a specific occupation may be small, moderate, or significant; the precise percentage reflects the judgment of the staff members based on the analyses described above that relate to that occupation. Once projected staffing patterns are available, they are used to allocate each industry's projected employment to detailed occupations. These estimates can then be summed across industries to yield total employment for each detailed occupation. Thus, the projected employment of an occupation is determined by staffing pattern changes, the projected growth in the industries in which that occupation resides, and technological/organizational change factors.

In addition to the employment projections generated using the process outlined above, occupational openings are also calculated.

Number of jobs due to growth represents the difference between the base employment in an occupation and the projection; if the projection for an occupation is negative, then openings due to growth are set to zero. This includes worker growth due to business expansion, as well as changes in staffing patterns for an industry. For example, several years ago hospitals began hiring a higher proportion of registered nurses and fewer LPNs to maximize the skills available in return for expenditures on personnel costs, to help meet recordkeeping requirements and to help ensure they were offering the highest level of healthcare possible.

Number of jobs needed due to net replacement is estimated by multiplying occupational employment estimates by national replacement rates supplied by the BLS. These rates estimate the number of job openings that are likely to be filled by young adults entering the workforce for the first time or older workers who are reentering the workforce. A replacement is an opening attributed to a worker who permanently leaves an occupation (e.g. retirement, death, exits the workforce, etc.).

Total openings are the summation of openings due to growth and openings due to replacement. Annualized results are calculated by dividing by 10, the number of years in the projection period.

South Dakota industry and occupational employment projections rely heavily on national industry and occupational employment projections produced by the U.S. Department of Labor's Bureau of Labor Statistics (BLS). The BLS produces nationwide employment projections every other year. South Dakota projections are based on Bureau of Labor Statistics (BLS) national projections, which can be found at http: //www.bls.gov/emp/home.htm.

The results are then evaluated by labor market analysts for reasonableness and consistency between industries and occupations. Projections are carefully reviewed and adjusted as needed, factoring in anticipated or known labor market trends that could dramatically affect employment.

Glossary

Change Factors
These coefficients are developed BLS to account for changes in industry staffing patterns over time. A detailed explanation of change factors is contained in the national projection methods at: stats.bls.gov/opub/hom/homch13_a.htm.

Current Employment Statistics (CES)
Each month the CES program surveys businesses and government agencies in order to provide detailed industry data on employment, hours and earnings of workers on nonfarm payrolls. This program is administered in South Dakota by the Labor Market Information Center in cooperation with the Bureau of Labor Statistics.

The U.S. Bureau of Labor Statistics, with the assistance of the Labor Market Information Center, surveys approximately 1,350 South Dakota businesses and government agencies, representing approximately 3,100 worksites for the CES program. This data is used by federal and state agencies to determine current economic trends.

2010 Base Number of Jobs
This total employment estimate is primarily based on data from South Dakota's Covered Employment and Wages (QCEW) program and the Current Employment Statistics (CES) program.

Estimates for agricultural-related employment not covered in the above programs, self-employed workers, and private household workers were derived from 2000 Census and Bureau of Labor Statistics data. Estimates of presumed non-covered (PNC) employment collected via a survey were also utilized in creating historical staffing patterns for religious organizations, schools and other establishments.

Total South Dakota 2010 base year employment was 462,975 compared to 421,040 for Local Area Unemployment Statistics (LAUS) employment, 389,199 for QCEW employment, and 403,200 for CES employment (published as nonfarm wage and salaried worker data) in 2010.

2020 Projected Number of Jobs
This total employment estimate is produced using forecasting software that utilizes a variety of mathematical models, including regression analyses, to produce a projected employment estimate.

This process takes into account state relationships to national factors on such data elements as population and personal income statistics.

Local Area Unemployment Statistics (LAUS)
The LAUS program produces monthly and annual employment, unemployment, and labor force data for census regions and divisions, states, counties, metropolitan areas and many cities, by place of residence. This program is administered in South Dakota by the Labor Market Information Center in cooperation with the Bureau of Labor Statistics.

This information provides useful knowledge about an area's economic well being by providing useful data on the number and percentage of people in an area maintaining or searching for employment.

North American Industry Classification System (NAICS)
The NAICS system provides a standard industrial classification system which allows government and business analysts to directly compare industrial production statistics collected and published in the three North American Free Trade Agreement countries. For more information see http://www.census.gov/epcd/www/naics.html.

Occupational Employment Statistics (OES)
The OES program surveys business establishments to produce employment and wage estimates for over 800 occupations. This program is administered in South Dakota by the Labor Market Information Center in cooperation with the Bureau of Labor Statistics.

These estimates include the number of people employed in certain occupations and the wages paid. Self-employed persons are not included in the estimates.

Data are available for the United States, all states, metropolitan areas and sub-state geographical areas. South Dakota gathers occupational information on more than 600 occupations statewide.

Presumed non-covered (PNC) employment
Not all workers are covered by South Dakota Unemployment Insurance law. South Dakota wage and salaried workers not covered include railroad employees, government elected officials, election workers, work-study students and religious organization employees. (Some religious organizations may opt to provide unemployment insurance coverage to their employees; these employees are included in the base year and projected worker levels. Nonprofit organizations may be required to be covered by unemployment insurance, depending upon whether or not they meet specific employment requirements.

Smaller businesses may also be exempted from coverage if they do not meet unemployment insurance law minimum payroll and employment criteria. Businesses who hire only a few workers on a part-time or seasonal basis, such as agricultural businesses, make up a large part of the exempted group.

Quarterly Census of Employment and Wages (QCEW)
The South Dakota QCEW program publishes a quarterly count of employment and wages reported by employers covering 92 percent of nonfarm jobs. This program is administered in South Dakota by the Labor Market Information Center in cooperation with the Bureau of Labor Statistics.

The QCEW data is available at the state, metropolitan and county level by industry. This data provides a good measure of the economic well-being of an area and are used to establish industry trends.

In addition, because the QCEW program is considered the "universe," other programs (such as CES) draw their sample of whom to survey from this program.

Average Annual Demand
The demand for workers needed yearly is based on two factors: the number of jobs expected to be available due to growth, and the number of jobs expected to be available due to replacement needs.

Total jobs are the summation of job openings due to growth and job openings due to replacement.

Annualized results are calculated by dividing by 10, the number of years in the projection period. Note: Average Annual Demand is an estimate that results from division. It is not the number of job vacancies in any specific year within the 10-year period.

Jobs Due to Growth
Jobs due to growth are created by industry employment expansion.

The annual average number of jobs expected to be available yearly due to growth is calculated by dividing the projected employment growth by the number of years in the projection period, in this case, 10.

Growth is rarely the main cause of net job openings and creates the majority of jobs expected to be available yearly only in the fastest growing occupations. Negative growth (or declining employment) is shown as zero; negative growth demand will not affect the replacement need.

Jobs Due To Net Replacement
Jobs available due to replacement are job openings attributed to workers who permanently leave an occupation (e.g. retirement, death, exits the workforce, etc.).

Annual average jobs due to net replacement are calculated using national net replacement rates. These rates are provided by BLS and applied to South Dakota employment figures to estimate the number of job openings that are likely to be filled by young adults entering the workforce for the first time or older workers who are reentering the workforce. The resulting net replacement figures are included in all occupational projection reports. A detailed explanation of how these rates are developed can be found at http://www.bls.gov/emp/ep_replacements.htm.

Resources

Standard Occupational Classification System (SOC)

Classification of Instructional Programs (CIP)

North American Industry Classification System (NAICS)

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Marcia Hultman, Secretary
700 Governors Drive
Pierre, SD 57501-2291
Tel. 605.773.3101
Fax. 605.773.6184