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Copyright 1998 by the Wyoming Department of Employment, Research & Planning

Seasonal Adjustment of Construction Employment

by: Gregg Detweiler

The Construction industry (see Figure) is one of four industries in Wyoming’s economy that illustrates both seasonal as well as cyclical effects within its time series. Cyclical effects are apparent when the time series rises and falls in a gentle, wavelike manner while seasonal effects are those rises and falls that always occur at a particular time of year. The essential difference between seasonal and cyclical effects is that seasonal effects are predictable, occurring at a given interval of time from the last occurrence, while cyclical effects are completely unpredictable. For example, the start of a new school year, hunting season and Christmas are seasonal (predictable) effects, since the time period is predefined. Cyclical (unpredictable) effects would include weather patterns, the stock market and interest rates, which are not predefined. Therefore, assuming that all independent variables affecting the employment series are constant, the difference between the projected and actual values can be used to identify economic activity. This includes business births and deaths and the opening or closing of special projects.

The time series in the Figure illustrates a gradual increase in Construction employment over the last 11 years. A more thorough analysis of this trend shows that the number of jobs added annually has decreased over the last five years. From 1988 to 1998, the trend analysis showed that Wyoming's Construction industry produced 531 jobs per year compared to 497 jobs from 1995 to 1998.

Table 1 compares the percent change between the projected and seasonally adjusted employment series of the Construction industry. The 1998 data for nonagricultural employment was projected using statistical models and then seasonally adjusted to eliminate the peaks and troughs to show the overall performance of the Construction industry. The nine month average, a statistical tool used to analyze a specific point in time, reveals no significant differences between the two employment series for the month of September. Both series are showing a 4.5 percent increase in jobs from a year ago. For statistical purposes, the employment level of 17,327 in September 1997 is equal to the estimate of 17.4 (rounding error) and that the preliminary estimate of 17.8 is statistically indistinguishable from the modeled value of 17,451. Table 2 is an industry summary of the total nonagricultural wage and salary employment, illustrating the percent change of seasonally adjusted data for Wyoming’s major industries.

Table 3 compares 1998 first quarter Covered Employment and Wages (ES-202) employment data with year ago levels by employing units1, size class, monthly employment and average weekly wage (AWW). The total number of units increased by 420 from first quarter 1997 with 73.8 percent of the growth coming from size class "0". For this and future discussions, size class "0" represents newly registered businesses or those self-employed individuals who have registered thinking that their establishment may become larger in the future, therefore, having to pay quarterly unemployment taxes on those employees. The second largest increase came in size class "1" with 73 new employing units, causing an average increase of 157 jobs from 1997. Size class "5," employing between 50-99 employees, produced the largest employment gain (588 jobs); however, it only produced a $5.77 increase in the AWW from $564.16 to $569.93.

The Construction industry, like all industries in Wyoming, is predominantly composed of small employers. In first quarter 1998, the Construction industry had 26 units (0.9%) that had 50 or more employees compared to 16 units (0.7%) in 1997. At the state level, Wyoming had 683 units (3.5%) with 50 or more employees compared to 654 units (3.8%) in first quarter 1997. Wyoming's current as well as future economic activity will continue to be dominated by small businesses.

Gregg Detweiler is a Senior Economist, specializing in Current Employment Statistics (CES) with Research & Planning.

1 An employing unit is the economic unit for which data is submitted on the employer's contribution report, or on a Multiple Worksite Report, or on an employment and wages report of a government entity or of a nonprofit organization. It is typically at a single physical location and engaged in one, or predominantly one, type of economic activity for which a single standard industrial classification (SIC) code may be applied.

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