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(THE SUMMARY METHODOLOGY STATEMENT HAS BEEN PROVIDED BY EURO AREA, WHICH IS SOLELY RESPONSIBLE FOR ITS ACCURACY AND COMPLETENESS. AT THE TIME OF POSTING, THE STATEMENT WAS REVIEWED BY THE IMF FOR CONSISTENCY WITH THE METADATA BASE PAGE DESCRIBING DISSEMINATION PRACTICES. SUBSCRIBERS ARE REQUIRED TO PROVIDE UPDATES TO THE STATEMENT, AS NEEDED, AND ARE EXPECTED TO MAKE OTHER IMPROVEMENTS, AS WARRANTED, TO ENHANCE TRANSPARENCY)

Euro Area
Summary Methodology
Labor market: Employment - National Accounts

Last Posted:	Nov-8-2006
Last Updated:	Nov-8-2006

Contact Person(s)		Printer Friendly Page
	Unit C2 National Accounts-Production , European Statistical Data Support: http://epp.eurostat.cec.eu.int/pls/portal/url/page/PGP_DS_SUPPORT, Eurostat, Statistical Office of the European Communities, Luxembourg L-2920

I. Analytical Framework, Concepts, Definitions, and Classifications
2.1.1 Concepts and definitions

Statistical concept

The European System of Accounts 1995 (ESA95) defines employment in chapter 11 in line with International Labour Organisation criteria. Employment covers all persons –both employees and self-employed- engaged in some productive activity that falls within the production boundary of the system (ESA95, para 11.11). National accounts measure employment alongside other variables such as GDP, output, compensation of employees, etc.

The quarterly accounts domain contains all the data currently available on Quarterly National Accounts. Quarterly National Accounts (ESA 1995, 12.01) form an integral part of the system of National Accounts. They constitute a coherent set of transactions, accounts and balancing items, defined in both the non-financial and financial domains, recorded on a quarterly basis. They adopt the same principles, definitions and structure as the annual accounts (see the main aggregates domain). The ESA 1995 regulation (Regulation 2223/96 of the European Council) and Eurostat's "Handbook on quarterly national accounts" may be referred to for more specific explanations on methodology.
2.3.1 Classification/sectorization

Quarterly employment estimates are published broken down by employees and self-employed.

In addition, quarterly domestic employment is broken down by A6 industry (see below).

Quarterly employment estimates are not published broken down by institutional sector.

Classification system and conformity with official standards

For all classifications mentioned below, see ESA95 Annex IV or refer to RAMON classification database for more details: link

Industries of economic activity

In terms of industries, six (A6) and seventeen (A17) items according to NACE Rev.1 are identified in ESA95 on a quarterly level. However quarterly European estimates are only calculated by A6 breakdown. The more detailed breakdown A31 is only used for annual data. The A6 breakdown is as follows:

A6 code

A6 label

1

Agriculture, hunting and forestry; fishing and operation of fish hatcheries and fish farms

2

Industry, including energy

3

Construction

4

Wholesale and retail trade; repair of motor vehicles and household goods, hotels and restaurants; transport and communications

5

Financial, real-estate, renting and business activities

6

Other service activities

II. Scope of the data
2.2.1 Scope

Scope of the data

Geographical coverage

Eurostat computes aggregates for the EU and the Euro area as a whole.

ESA95 defines geographical coverage in terms of resident units in the economic territory.

In the case of employment, two geographical scopes can be considered: employment by units resident in the economic territory (called domestic scope) and employment of resident households (called national scope). Eurostat publishes both quarterly, including a breakdown by employee/self-employed. In addition, the domestic employment is also published with a breakdown by 6 industries.

Statistical units and Statistical population

National accounts are dealing with the economy (or large sub-sectors) as a whole. It combines data from a host of base statistics, and thus has no common sampling reference frame. The elementary building block of ESA95 statistics is the institutional unit (ESA95, 2.12.), “an elementary economic decision-making centre characterised by uniformity of behaviour and decision-making autonomy in the exercise of its principal function”. This can be, amongst others, a household, a corporation or a government agency. Institutional units producing goods and services are often engaged in a combination of activities at the same time. For national accounts purposes, they are therefore split into local kind-of-activity units (ESA 1995, 2.102.), characterised by involvement in a single activity. These are then grouped into industries, so that a big industrial enterprise may contribute to activities in a number of different branches. For further detail, please refer to ESA95.

III. Accounting Conventions
2.4.2 Recording basis

Recording of transactions

For any accounting conventions with respect to the recording of transactions, please refer to the ESA95 and the Handbook of Quarterly National Accounts.

Reference period

The periods referred to are quarters, with temporal coverage varying between geographical units.

IV. Nature of the Basic Data Sources
3.1.1 Source data collection programs

Data sources used

Eurostat produces estimates for the European Union and for the euro area. Eurostat uses as input the estimates for the EU Member States and euro area countries.

Eurostat produces estimates from 1995Q1 (for EU) and from 1991Q1 (for euro area). The length of the Member States series available varies widely from one country to another, partly due to derogations provided for in the transmission and back-projection programme. The default minimum period covered is currently from 1995 onwards, with some exceptions in the case of the New Member States. For many countries, however, longer series are available.

Figures are collected from National Statistical Institutes' Accounts Departments. The basic statistics come from many sources, including administrative data from government, censuses, and surveys of businesses and households. Sources vary from country to country and may cover a large set of economic, social, financial and environmental items, which need not always be strictly related to National Accounts. In any case, there is no single one survey source for National Accounts. Since National figures are collected from National Statistical Institutes' Accounts Departments, for further information you may also refer to National Statistical Institutes and National Central Banks.

V. Compilation Practices
3.3.2 Other statistical procedures

Eurostat compiles national accounts for the EU and the euro area according to the so-called "indirect" approach, i.e. on the basis of Member States' national accounts and not by using European surveys. The EU Member States transmit quarterly their estimates to Eurostat at t+70 days after the end of the reference quarter. Estimation of quarterly European aggregates at t+70 days by simple summation of Member States' figures is not possible because some Member States do not estimate quarterly employment or because estimates for the most recent quarter are not yet available at the time of the European release. An alternative method is used instead.

The shares of Member States' data normally available at 70 days are 89% for the euro area and 82% for the EU. These are indicative shares and may change from quarter to quarter, depending on the timing of Member States' estimations.

While quarterly employment data is not available for all Member States, there is 100% coverage for annual figures. This makes it possible to combine the available quarterly country data with the complete annual euro area and EU series in a model to produce the quarterly euro area and EU employment series. This is the approach followed by Eurostat. The two sets of quarterly and annual data are fed into a temporal disaggregation model, which derives high frequency data (i.e. quarterly series) from low frequency data (i.e. annual series) and related high frequency information (i.e. a quarterly indicator). The annual series for euro area and EU are calculated by summation of country data. These series carry the information about the European levels but they only cover the periods up to the most recent finalised year. The quarterly indicator is calculated as the sum of available quarterly country data up to the most recent quarter. It carries information about the trends and also about the movements in the most recent quarters. The main hypothesis of the model is that the indicator series correctly captures the movements of the variable of interest. This is a reasonable hypothesis, as the indicator covers 89% of the variable of interest.

Eurostat applies this method separately to non-seasonally adjusted series and to seasonally adjusted series. Availability of data for each of the indicators may differ. Whenever for a certain Member State the seasonally adjusted series is not available but the non-seasonally adjusted series is, Eurostat seasonally adjusts the latter and integrates it as an input to the estimation process.

The table below shows the weight of Member States in European employment.

Table: Relative weights of Member States in euro area/EU25 employment in national accounts (year 2005)

3.4.1 Validation of intermediate results

Data validation of statistical data

Source data undergo a sequence of checks within NSIs. Eurostat checks national data mainly for completeness (coverage of reference periods and variables) and consistency (accounting consistency, time-consistency between QNA and ANA, and consistency over time) and follows up with NSIs on any lack of quality in this respect.

The same checks are applied to data for the European aggregates. Validation against data from other domains is done on an ad-hoc basis, as is the validation of statistical tools used.
3.4.2 Assessment of intermediate data

Relation between employment in the labour force survey and in national accounts

Estimates of employment in national accounts may differ from results of other statistics and surveys, in particular the labour force survey (LFS). There are differences due to integration of sources and due to conceptual reasons:

Differences due to integration:

·       National accounts integrate information from many sources. All sources available (including LFS) are assessed and subsequently the best way of integrating them is decided. Each source may shed light on a part of the economy. Some countries make very minor use of LFS in national accounts. The information is combined to provide the most complete and consistent estimate. As a consequence, each individual basic source may provide results that are different from the integrated national accounts estimates.

·       In national accounts, employment figures must be consistent with other variables such as output and compensation of employees (i.e. wages, salaries and social contributions). Ensuring consistency between variables may result in adjustments.

Conceptual differences:

·       Geographical scope: ESA95 acknowledges two employment concepts depending on the geographical coverage: resident persons in employment (i.e. the so-called national concept of employment) and employment in resident production units irrespective of the place of residence of the employed person (i.e. domestic concept). The difference between them corresponds mainly to the net number of cross-border workers. The figures in this News Release correspond to the domestic concept. This concept is more appropriate when examining employment and GDP together. LFS, on the other hand, covers resident households. Hence LFS gives information on the major part of the national concept. This means that LFS data must be adjusted, mainly for cross-border workers, to align with the domestic concept normally used in national accounts.

·       Coverage differences: LFS does not cover persons living in institutional or collective households (e.g. conscripts), unpaid apprentices and trainees and/or persons on extended parental leave. They are all covered by ESA95 employment. Appropriate adjustments are therefore needed.

·       Recording thresholds: LFS results exclude persons below 15 years old from the definition of employment (in some countries the exclusion boundaries are below 16 years old and/or above 75 years old). National accounts do not exclude individuals from employment because of age. The difference is very small in developed economies.

The size of these conceptual adjustments is modest, with the possible exception of conscripts, and cross-border workers for small countries.

VI. Other Aspects

Footnotes

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Footnotes
Last posted: Date IMF staff last posted an update to these metadata on the DSBB.
Last certified: Date subscriber last officially certified the accuracy of these metadata.
Last updated: Date subscriber last submitted an update of these metadata to the IMF.