Measures of Job Flow Dynamics in the U.S. Economy

This paper uses the new Longitudinal Establishment and Enterprise Microdata (LEEM) at CES to investigate gross and net job flows for the U.S. economy. Much of the previous work on U.S. job flows has been based on analysis of the Longitudinal Research Database (LRD), which is limited to establishments in the manufacturing sector. The LEEM is the first high-quality, nationwide, comprehensive database for both manufacturing and non-manufacturing that is suitable for measuring annual job flows. We utilize the LEEM data to measure recent gross and net job flows for the entire U.S. economy. We then examine the relationships between firm size and establishment age, and investigate differences resulting from use of two alternative methods for classification of job flows by size of firm and establishment. Cell-based regression alnalysis is used to help distinguish among the effects of age, firm size and establishment size on gross and net job flows in existing establishments. We find that gross job flow rates decline with age, and with increasing establishment size when controlling for age differences, whether initial size or mean size classification is utilized. Firm size differences contribute little or nothing additional when establishment size and age are controlled for. However, the relationship of net job grwoth to business size is very sensitive to the size classification method, even when data and all other methodology are identical. When mean size classification is used, the coefficient on establishment size for net job growth is generally positive, but when initial size is used, this coefficient is negative. These results shed light on some of the apparently conflicting findings in the literature on the relationship between net growth and the size of the business.