Improving the Accuracy of Economic Measurement with Multiple Data Sources: The Case of Payroll Employment Data

34 Pages Posted: 9 Jul 2019

See all articles by Tomaz Cajner

Tomaz Cajner

Board of Governors of the Federal Reserve System

Leland Dod Crane

Board of Governors of the Federal Reserve System

Ryan Decker

Board of Governors of the Federal Reserve System

Adrian Hamins-Puertolas

Board of Governors of the Federal Reserve System

Christopher Johann Kurz

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: July 2019

Abstract

This paper combines information from two sources of U.S. private payroll employment to increase the accuracy of real-time measurement of the labor market. The sources are the Current Employment Statistics (CES) from BLS and microdata from the payroll processing firm ADP. We briefly describe the ADP-derived data series, compare it to the BLS data, and describe an exercise that benchmarks the data series to an employment census. The CES and the ADP employment data are each derived from roughly equal-sized samples. We argue that combining CES and ADP data series reduces the measurement error inherent in both data sources. In particular, we infer “true” unobserved payroll employment growth using a state-space model and find that the optimal predictor of the unobserved state puts approximately equal weight on the CES and ADP-derived series. Moreover, the estimated state contains information about future readings of payroll employment.

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Suggested Citation

Cajner, Tomaz and Crane, Leland Dod and Decker, Ryan and Hamins-Puertolas, Adrian and Kurz, Christopher Johann, Improving the Accuracy of Economic Measurement with Multiple Data Sources: The Case of Payroll Employment Data (July 2019). NBER Working Paper No. w26033, Available at SSRN: https://ssrn.com/abstract=3416333

Tomaz Cajner (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
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Leland Dod Crane

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ryan Decker

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Adrian Hamins-Puertolas

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Christopher Johann Kurz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551

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