Effects of Hurricane Katrina on Local Area Unemployment Statistics

The Local Area Unemployment Statistics (LAUS) estimates for the month of September 2005 are among the first subnational data to reflect the impact of Hurricane Katrina, which struck the Gulf Coast on August 29, with catastrophic effects in parts of Louisiana, Mississippi, and Alabama. For the September 2005 LAUS estimates, BLS and its state partners have made a number of modifications to standard estimating procedures to better reflect the employment and unemployment situation for the month. These include:

• Overriding the built-in feature of the methodology that smoothes over large shifts in key inputs—unemployment insurance (UI) claims and nonfarm wage and salary employment—to the models for estimating State labor force measures.
• Developing non-model-based LAUS estimates for the New Orleans metropolitan area.
• Not publishing labor force estimates for very small areas—for example counties within labor market areas or cities within counties—where the quality of input data was severely compromised by the hurricane.

Although program operations have been disrupted to some extent by the aftereffects of Hurricane Katrina along the Gulf Coast, BLS is adhering to its previously announced publication dates of October 21 for September Region and State LAUS estimates and November 2 for metropolitan areas.

Below is a summary of the LAUS program. This is followed by a set of questions and answers that provide more detailed information on LAUS concepts, impacts on data development, and estimation procedure adjustments taken by BLS in this unusual situation.

LAUS CONCEPTS AND DEFINITIONS

The LAUS program produces the monthly unemployment rates as well as estimates of total employment and unemployment for approximately 7,200 areas through a Federal-State cooperative effort. LAUS areas include Census Regions and Divisions, States, and labor market areas that encompass the entire country. LAUS estimates are based on statistical models of varying degrees of complexity, with the strongest models for Census Divisions, States, and selected Metropolitan areas. Key inputs to LAUS estimation include data from the Current Population Survey (CPS), the Current Employment Statistics (CES) program, and Unemployment Insurance (UI) systems, all of which have been affected by Hurricane Katrina.

The concepts and definitions underlying LAUS data come from the CPS, the household survey that yields the official measures of the labor force for the nation. Monthly CPS estimates are not used directly in the LAUS program, but for LAUS estimation of States and eight substate areas (including the New Orleans metropolitan area), the monthly CPS estimates are inputs to models. State models are controlled in "real time" to CPS-based Division models that sum to national monthly labor force estimates from the CPS. For a discussion of the CPS issues associated with Katrina and the actions BLS is taking in that program, please see Effects of Hurricane Katrina on the Current Population Survey.

The State and metropolitan area LAUS estimates also use data from the CES program, the payroll survey that yields estimates of nonfarm wage and salary employment. For a discussion of the CES issues associated with Katrina and the actions BLS is taking in that program, please see Effects of Hurricane Katrina on the Current Employment Statistics Survey. Unemployment insurance (UI) data are an important input to LAUS estimation, especially at the substate level. Detailed information on the UI statistics and LAUS estimation issues is contained in the questions and answers below.

1. What LAUS areas are affected by Hurricane Katrina?

   The States of Louisiana, Mississippi, and Alabama were directly affected by the hurricane. Louisiana is part of the West South Central Division, along with Texas, Oklahoma, and Arkansas. Mississippi and Alabama are part of the East South Central Division, along with Tennessee and Kentucky. In Louisiana, 64 parishes were determined by the Federal Emergency Management Agency (FEMA) to be eligible for either public or public and individual assistance. In Mississippi, 82 counties had such designation, while in Alabama, 12 counties were so identified. Within the directly affected States, BLS publishes the following metropolitan areas and micropolitan areas in the most heavily impacted areas (those determined by FEMA to be eligible for individual and public assistance):

   • Alabama:
   • Metropolitan Areas: Mobile and Tuscaloosa
   • Micropolitan Areas: Daphne-Fairhope
   • Louisiana:
   • Metropolitan Areas: Baton Rouge, Houma-Bayou Cane-Thibodaux, Lafayette, Lake Charles, and New Orleans-Metairie-Kenner
   • Micropolitan Areas: Abbeville, Bogalusa, Crowley, Hammond, Jennings, Morgan City, New Iberia, and Pierre Part
   • Mississippi:
   • Metropolitan Areas: Gulfport-Biloxi, Hattiesburg, Jackson, and Pascagoula
   • Micropolitan Areas: Brookhaven, Columbus, Laurel, McComb, Meridian, Natchez (MS-LA, MS county only), Picayune, Starkville, Vicksburg, and Yazoo City

   For a complete listing of affected counties and parishes, please see Affected area definitions.

   In addition to these areas, the impact of the hurricane may be seen in LAUS estimates for areas that are housing evacuees and people who have resettled, in particular through the UI claims counts.

2. How are inputs to LAUS estimation impacted by Hurricane Katrina?

   Decisions made for the CPS regarding September data collection and estimation have impacted State and area CPS estimates in the affected States. No data collection occurred in Orleans and Jefferson parishes in Louisiana and nonresponse was high in other affected areas because housing units in the sample were destroyed or because people had not yet returned to their homes. Details on CPS data collection and estimation can be obtained from Effects of Hurricane Katrina on the Current Population Survey.

   The CES (payroll) data are also an input to the LAUS State models and to metropolitan area estimates, and decisions on September data collection and estimation impacted the affected areas. (CES data are not used as inputs to the Division models.) While the CES input is typically not a major contributor to the LAUS State model employment estimate, CES metropolitan area estimates are important in those areas. Details on CES data collection and estimation can be obtained from Effects of Hurricane Katrina on the Current Employment Statistics Survey

   The LAUS program uses the count of State UI continued claimants without earnings from employment as an input to State and labor market area estimates of unemployment. At the State level, the UI claims count typically is not a major contributor to the LAUS State unemployment estimate. At the substate level, UI data are important to the unemployment estimate, since the data are current and pertain to place of residence of the individual. For labor market areas, LAUS uses the UI data based on the State and county/parish of residence that is provided through the UI claims process. In September, States processed claims for State UI filed by Katrina-affected individuals in accordance with procedures established in cooperation with the Department of Labor.

3. Do LAUS estimates reflect the geographic moves of the population affected by Hurricane Katrina?

   No. Official estimates of the population shifts associated with the evacuation and relocation of Louisiana, Mississippi, and Alabama residents are not available at this time. Therefore, explicit adjustment of the LAUS State estimates to reduce population and, in turn, labor force estimates in these three States and increase estimates in States such as Texas, Arkansas, and Georgia where evacuees relocated is not possible. To the extent that UI claims counts are based on current place of residence, LAUS substate unemployment estimates may reflect some of the movement, but these estimates will still be controlled to the State totals.

4. Does the receipt of Disaster Unemployment Assistance (DUA) classify a person as unemployed under the LAUS concept?

   No. The qualifications to receive Disaster Unemployment Assistance (DUA) differ from qualification from regular UI. For example, individuals can qualify for DUA even if they are still employed under the CPS concept. The definition of employed persons under the Current Population Survey (CPS) includes all those who were not working but who had jobs or businesses from which they were temporarily absent because of bad weather, whether they were paid for the time off or were seeking other jobs.

   In addition, individuals who are receiving DUA benefits must not have been deemed eligible for regular State UI benefits. These individuals are outside the scope of regular UI and are either already accounted for in the LAUS methodology, such as unemployed individuals who have exhausted UI benefits, or they do not meet the CPS criteria to be classified as unemployed.

5. LAUS ESTIMATION PROCEDURES

6. Has BLS modified its estimation procedures for affected Divisions and States for the September 2005 estimates?

   Yes. While the Census Bureau undertook extraordinary efforts to collect data in September, the CPS estimates for the affected Divisions and States did not show the same disaster impact as other important economic series – the nonfarm wage and salary estimate and the count of UI claimants developed specifically for BLS/LAUS estimation. The UI claims in Louisiana and Mississippi rose dramatically in September, and payroll employment dropped significantly in both States. In contrast, CPS estimates for these states showed little change from August to September; this probably resulted from the high nonresponse in areas affected by the storm as well as the lack of adjustment to state population controls. BLS determined that the CES and UI movements more accurately depicted the labor force experience in these two States, and, consequently, in the East South Central and West South Central Divisions. Standard LAUS estimating procedures were modified accordingly.

7. How were procedures modified in developing the labor force estimates for Louisiana and the West South Central Division and Mississippi and the East South Central Division?

   September State models for Louisiana and Mississippi were modified to allow the CES and UI inputs to exert more influence on the final estimates of employment and unemployment than they typically do since, in this situation, they were capturing more of the economic effects of Katrina. Special variables were also used that transferred the shifts in these two variables directly to the model estimates. In this way, the model estimates provide a better measure of the labor force values for these areas. The modifications for Louisiana were incorporated in the West South Central Division estimates, along with the use of a special variable in the Division models. The Mississippi modifications were reflected in the estimates for the East South Central Division. However, a special division variable was not called for in this case.

8. Will the Division estimates equal the national CPS totals of employment and unemployment?

   No. Because the estimates for the West and East South Central Divisions were adjusted to more fully reflect the impact of Katrina on employment and unemployment in Louisiana and Mississippi, they will be used in developing labor force estimates that exhaust the US. Therefore, the labor force estimates developed by summing the Division/State LAUS estimates will not equal the official CPS national estimate.

9. How will estimates be prepared for the New Orleans metropolitan area?

   Prior to September, the New Orleans metropolitan area labor force estimates were developed by modeling CPS data. Because Jefferson and Orleans Parishes were under mandatory evacuation, CPS data collection was precluded. Thus, we will not make a model-based estimate for the New Orleans metropolitan area. We will develop an estimate based on the standard estimating methodology that is utilized in most of the other labor market areas in the country. Lacking Jefferson and Orleans Parishes, we will not disaggregate the New Orleans metropolitan area into component parishes, or develop city estimates within the metropolitan area.

10. Will other small area estimates be impacted by the hurricane?

    It is possible that the procedures used to disaggregate labor market area estimates of employment and unemployment will be distorted because of the effect of Hurricane Katrina on local population estimates and UI claims filing, two key components of the procedures. If this occurs, then, while LAUS estimates will be made for the labor market area, BLS may determine that LAUS estimates for the component counties and cities cannot be developed. This decision will be made in consultation with the affected State.

11. Will BLS institute other special estimating procedures for affected areas?

    Yes. Commuting data from the 2000 Census is used in the LAUS program to adjust place-of-work employment estimates to place-of-residence. Commuting relationships in many areas of the directly affected States have been severely altered. In such areas, BLS intends to adjust the commuting relationships to reflect the current situation. These adjustments will be determined in cooperation with the affected State.

    Adjustment of existing procedures for distributing unemployed new and reentrants to the labor market also may be warranted. These procedures rely on population distributions which may be significantly altered. These adjustments also will be determined in cooperation with the affected State.

12. When will these special estimation procedures be discontinued?

    BLS will continue to evaluate the data used in LAUS estimation and determine whether special procedures are required on a month-to-month basis.

    Last Modified Date: October 20, 2005