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

Tomaz Cajner, Leland D. Crane, Ryan A. Decker, Adrian Hamins-Puertolas, Christopher Kurz

NBER Working Paper No. 26033
Issued in July 2019
NBER Program(s):Economic Fluctuations and Growth, Labor Studies

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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w26033

Forthcoming: Improving the Accuracy of Economic Measurement with Multiple Data Sources: The Case of Payroll Employment Data, Tomaz Cajner, Leland D. Crane, Ryan A. Decker, Adrian Hamins-Puertolas, Christopher Kurz. in Big Data for Twenty-First Century Economic Statistics, Abraham, Jarmin, Moyer, and Shapiro. 2020