Sources of Employment Change in the Tenth District

C jobs is often the primary goal of economic development policy. To help target their job creation efforts, policymakers generally examine net changes in the official employment figures. But relying solely on net changes can often hide important gross changes that influence the dynamics of job creation and destruction. Knowing where jobs are currently being created and destroyed in an economy can help policymakers design and target their economic development efforts. Net employment changes can be traced to four gross components of job creation and job loss. The four components are (1) jobs created at new businesses, (2) jobs created at existing businesses, (3) jobs destroyed at existing businesses that remain open, and (4) jobs destroyed at existing businesses that close. The net employment changes routinely reported in the press are the result of subtracting the jobs lost, when existing businesses shrink or close, from the jobs created, when new business open or existing businesses expand. Consequently, small net employment changes can be produced by large, but offsetting, changes in the gross components. What is the relative importance of each of these four components of gross job change in the Tenth District? The first section uses U.S. Bureau of the Census statistics to show how each of the four gross components performed in the district from 1989 to 1991—the only years for which data are available for all industries. The second section examines the four components of a single industry— manufacturing—over a longer time period, 1972 to 1988. The article concludes that expansions and contractions at existing businesses are driving forces behind employment change in the district, but openings of new businesses can help keep net job growth positive. HOW IMPORTANT ARE THE GROSS JOB COMPONENTS?