Bayesian Shrinkage

Bayesian shrinkage is a statistical method that pulls an estimate from a small or noisy sample toward a broader prior, producing a more stable figure when data is thin.

For a category with few transactions, shrinkage blends its sparse data with the wider market, preventing a handful of trades from producing a wild rate.

The WorkForce Labor Index applies shrinkage so thin categories report conservative, stable rates rather than overconfident ones.