Business Employment Dynamics in Oregon – Employment Change As the Pandemic Gripped the EconomyApril 28, 2021
Obtaining timely data regarding business closure is not easy, as regional economist Damon Runberg noted his recent article on Oregon’s brewery industry, “We don’t have a good measure on business closures and openings, but we do know if an establishment stopped reporting employment or began reporting employment for the first time.” Oregon Office of Economic Analysis also laments the lack of business closure data. “Unfortunately we lack good, timely data on firm closures. It takes months to realize that a business is not reporting payroll, paying taxes, renewing business licenses and the like.”
It is encouraging that recently Mr. Lehner noted that business formations are rising, and we also have updated information now through fourth quarter of 2020 that show total business units in Oregon climbed from 160,442 during the fourth quarter of 2019 to 167,533 in the fourth quarter of 2020, a gain of 4.4%. Of course, during that time Oregon shed jobs. Payroll employment from the Quarterly Census of Employment and Wages (QCEW) program show payroll jobs falling by 7.4% between December 2019 and December 2020. More businesses with less total jobs seems to be the trend over the year.
While possibly not as timely as some other data sources, the U.S. Bureau of Labor Statistics’ Business Employment Dynamics (BDM) data does give more insight into job change by businesses who are either opening, closing, expanding or contracting. Data are now available for the second quarter of 2020, just as the pandemic’s impacts were being felt the strongest across the economy and Oregon’s job market. Business Employment Dynamics statistics track changes in employment at the establishment level, revealing the dynamics underlying net changes in employment. These data include the number and rates of gross jobs gained at opening and expanding establishments, as well as the number and rates of gross jobs lost by closing and contracting establishments. Since this data is compiled from payroll jobs covered by unemployment insurance, it does not capture all firms and workers with the major exclusions being self-employed workers, religious organizations, most agricultural workers on small farms, all members of the Armed Forces, elected officials in most States, most employees of railroads, some domestic workers, most student workers at schools, and employees of certain nonprofit organizations.
Gross job gains and gross job losses data do not include government employees, private households, and establishments with zero employment. The universe of Business Employment Dynamics data is smaller than the QCEW program due to these exclusions. The Business Employment Dynamics data measure job changes at the establishment level. They do not account for employment changes within the establishment that may, for example, keep its employment constant. Thus, job flows measure what is happening to establishments, such as the Job Opening and Labor Turnover Survey (JOLTS). Business Employment Dynamics estimates track changes in employment at the establishment level, providing a picture of the dynamics underlying the aggregate net employment growth statistics. The gross job gain and gross job loss statistics will be particularly useful in decomposing the forces behind net changes in employment. There are four measures available from the BDM data: openings, expansions, closings and contractions.
Openings: Either establishments with positive third month employment for the first time in the current quarter, with no links to the prior quarter, or with positive third month employment in the current quarter following zero employment in the previous quarter.
Expansions: Establishments with positive employment in the third month in both the previous and current quarters, with a net increase in employment over this period.
Closings: Either establishments with positive third month employment in the previous quarter, with no positive employment reported in the current quarter, or with positive third month employment in the previous quarter followed by zero employment in the current quarter.
Contractions: Establishments with positive employment in the third month in both the previous and current quarters, with a net decrease in employment over this period.
Looks at recent trends in Oregon’s BDM data show some of those underlying trends within our economy during the early stages of the COVID pandemic recession--at least through June 2020. Looking at the overall trends, we saw Oregon net a change in employment of -129,435 in the second quarter of 2020. That is the difference between total gross jobs gains from expansions and openings and total gross job losses from contractions and closures. Compared to the second quarter of 2019, jobs lost by business contractions nearly tripled going from about 63,000 to more than 181,000. Jobs lost from business closures rose by 75% over the year, from about 44,000 to reach 77,002 during the second quarter of 2020. Even during the pandemic, jobs were added at opening firms, just more than 16,400 in the second quarter of 2020, which was down -2.4% from the 16,800 jobs gained from expansions during the second quarter of 2020. Job gains from firm expansions also declined over the year, down by about 30% from 109,455 jobs in the second quarter of 2019 to 77,062 jobs in the quarter ending June 2020. These data point out that even during a crushing pandemic effecting so many jobs, there are other firms continuing to expand and new firms adding jobs.
Turning to jobs lost due to closures, those are the lost jobs that garner the most worry. We have already seen an uptick in the long-term unemployed, rising to over 50,000 most recently. We don’t know how many of these long-term unemployed are from businesses who have closed, but it’s probably more difficult to get hired at a new business than to return to work at a business that has downsized and then wants to rehire workers. Turning to more detail regarding jobs lost due to closure by industry, we do see losses where you would expect in greatest numbers – the leisure and hospitality industry. Jobs lost due to closure rose from about 2,400 in the second quarter of 2019 to more than 14,600 during the second quarter of 2020, a five-fold increase.
As subsequent quarters of Business Employment Dynamic data become available, we will be able to look at some of the signs of somewhat more permanent damage to the economy that some analysts lose a bit of sleep about. “Economists remain very concerned about business closures and permanent layoffs. The more of this economic scaring that accumulates, and there will be more, before the recovery can truly get underway will weigh on the strength of that recovery. Even under the best of circumstances it takes time for new firms to replace the lost ones and for laid off workers to find new jobs”, Oregon Office of Economic Analysis, Oregon Economic and Revenue Forecast – March 2021.
Business Employment Data is another tool to help understand if we are rebuilding the economy with employment from new firms or if it is the expansion of existing firms driving the net employment change. For more information, go to the Bureau of Labor Statistics’ Business Employment Dynamics homepage.