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How well does employment predict output?

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  • Kevin L. Kliesen

Abstract

Economists, policymakers, and financial market analysts typically pay close attention to aggregate employment trends because employment is thought to be an important indicator of macroeconomic conditions. One difficulty is that there are two separate surveys of employment, which can diverge widely from one another, as the previous and current economic expansions demonstrate. The conventional wisdom is that, for assessing economic conditions, the survey that counts the number of jobs (establishment survey) is preferable to the survey that counts the number of people employed (household survey). However, results from a one-quarter-ahead forecasting exercise presented in this paper suggest that analysts should question whether employment is a useful indicator for predicting output growth.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2007)
Issue (Month): Sep ()
Pages: 433-446

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Handle: RePEc:fip:fedlrv:y:2007:i:sep:p:433-446:n:v.89no.5

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Keywords: Employment forecasting;

References

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  1. Todd E. Clark & Michael McCracken, 1999. "Tests of Equal Forecast Accuracy and Encompassing for Nested Models," Computing in Economics and Finance 1999, Society for Computational Economics 1241, Society for Computational Economics.
  2. Chinhui Juhn & Simon Potter, 1999. "Explaining the recent divergence in payroll and household employment growth," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 5(Dec).
  3. Kevin L. Kliesen & Frank A. Schmid, 2006. "Macroeconomic news and real interest rates," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Mar, pages 133-144.
  4. Daniel Aaronson & Ellen Rissman & Daniel G. Sullivan, 2004. "Can sectoral reallocation explain the jobless recovery?," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q II, pages 36-39.
  5. George A. Kahn, 1993. "Sluggish job growth: is rising productivity or an anemic recovery to blame?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-25.
  6. Kathryn Koenders & Richard Rogerson, 2005. "Organizational dynamics over the business cycle: a view on jobless recoveries," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jul, pages 555-580.
  7. Todd Clark & Michael McCracken, 2005. "Evaluating Direct Multistep Forecasts," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 24(4), pages 369-404.
  8. Erica L. Groshen & Simon Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 9(Aug).
  9. Kevin L. Kliesen & Frank A. Schmid, 2004. "Monetary policy actions, macroeconomic data releases, and inflation expectations," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 9-22.
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Cited by:
  1. Kurose, Kazuhiro, 2009. "The relation between the speed of demand saturation and the dynamism of the labour market," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 20(2), pages 151-159, June.

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