The Ins and Outs of Forecasting Unemployment: Using Labor Force Flows to Forecast the Labor Market
This paper presents a forecasting model of unemployment based on labor force ows data that, in real time, dramatically outperforms the Survey of Professional Forecasters, historical forecasts from the Federal Reserve Board's Greenbook, and basic time-series models. Our model's forecast has a root-mean-squared error about 30 percent below that of the next-best forecast in the near term and performs especially well surrounding large recessions and cyclical turning points. Further, because our model uses information on labor force ows that is likely not incorporated by other forecasts, a combined forecast including our model's forecast and the SPF forecast yields an improvement over the latter alone of about 35 percent for current-quarter forecasts, and 15 percent for next-quarter forecasts, as well as improvements at longer horizons.
(This abstract was borrowed from another version of this item.)
Volume (Year): 45 (2012)
Issue (Month): 2 (Fall) ()
|Contact details of provider:|| Postal: 1775 Massachusetts Ave NW, Washington DC 20036|
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barbara Petrongolo & Christopher Pissarides, 2008.
"The ins and outs of European unemployment,"
LSE Research Online Documents on Economics
3658, London School of Economics and Political Science, LSE Library.
- Petrongolo, Barbara & Pissarides, Christopher A., 2008. "The Ins and Outs of European Unemployment," IZA Discussion Papers 3315, Institute for the Study of Labor (IZA).
- Barbara Petrongolo & Christopher A. Pissarides, 2008. "The Ins and Outs of European Unemployment," CEP Discussion Papers dp0853, Centre for Economic Performance, LSE.
- Petrongolo, Barbara & Pissarides, Christopher, 2008. "The Ins and Outs of European Unemployment," CEPR Discussion Papers 6681, C.E.P.R. Discussion Papers.
- Barbara Petrongolo & Christopher Pissarides, 2008. "The ins and outs of European unemployment," LSE Research Online Documents on Economics 3607, London School of Economics and Political Science, LSE Library.
- Shigeru Fujita & Garey Ramey, 2012. "Exogenous vs. endogenous separation," Working Papers 12-2, Federal Reserve Bank of Philadelphia.
- Baghestani, Hamid, 2008. "Federal Reserve versus private information: Who is the best unemployment rate predictor," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 101-110.
- Barnichon, Regis, 2012.
"Vacancy posting, job separation and unemployment fluctuations,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 36(3), pages 315-330.
- Regis Barnichon, 2009. "Vacancy posting, job separation and unemployment fluctuations," Finance and Economics Discussion Series 2009-35, Board of Governors of the Federal Reserve System (U.S.).
- Shigeru Fujita & Garey Ramey, 2009.
"The Cyclicality Of Separation And Job Finding Rates,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, 05.
- Shigeru Fujita & Garey Ramey, 2007. "The cyclicality of separation and job finding rates," Working Papers 07-19, Federal Reserve Bank of Philadelphia.
- George L. Perry, 1972. "Unemployment Flows in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(2), pages 245-292.
- Diebold, Francis X & Mariano, Roberto S, 2002.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 134-44, January.
- Amos Golan & Jeffrey M. Perloff, 2004.
"Superior Forecasts of the U.S. Unemployment Rate Using a Nonparametric Method,"
The Review of Economics and Statistics,
MIT Press, vol. 86(1), pages 433-438, February.
- Golan, Amos & Perloff, Jeffrey M, 2002. "Superior forecasts of the U.S. unemployment rate using a nonparametric method," CUDARE Working Paper Series 956, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Golan, Amos & Perloff, Jeffrey M., 2002. "Superior Forecasts of the U.S. Unemployment Rate Using a Nonparametric Method," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2bw559zk, Department of Agricultural & Resource Economics, UC Berkeley.
- Shigeru Fujita, 2009.
"Dynamics of worker flows and vacancies: evidence from the sign restriction approach,"
07-12, Federal Reserve Bank of Philadelphia.
- Shigeru Fujita, 2011. "Dynamics of worker flows and vacancies: evidence from the sign restriction approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(1), pages 89-121, January/F.
- Charles A. Fleischman & John M. Roberts, 2011. "From many series, one cycle: improved estimates of the business cycle from a multivariate unobserved components model," Finance and Economics Discussion Series 2011-46, Board of Governors of the Federal Reserve System (U.S.).
- Laura Brown & Saeed Moshiri, 2004. "Unemployment variation over the business cycles: a comparison of forecasting models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(7), pages 497-511.
- Wesley Clair Mitchell, 1927. "Introductory pages to "Business Cycles: The Problem and Its Setting"," NBER Chapters, in: Business Cycles: The Problem and Its Setting, pages -23 National Bureau of Economic Research, Inc.
- Peter Tulip, 2009. "Has the Economy Become More Predictable? Changes in Greenbook Forecast Accuracy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1217-1231, 09.
- Bruce C. Fallick & Jonathan F. Pingle, 2006. "A cohort-based model of labor force participation," Finance and Economics Discussion Series 2007-09, Board of Governors of the Federal Reserve System (U.S.).
- Rothman, Philip, 1991.
"Further evidence on the asymmetric behavior of unemployment rates over the business cycle,"
Journal of Macroeconomics,
Elsevier, vol. 13(2), pages 291-298.
- Rothman, Philip, 1988. "Further Evidence On The Asymmetric Behavior Of Unemployment Rates Over The Business Cycle," Working Papers 88-23, C.V. Starr Center for Applied Economics, New York University.
- Stephanie Aaronson & Bruce Fallick & Andrew Figura & Jonathan Pingle & William Wascher, 2006. "The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 69-154.
- repec:rim:rimwps:49-07 is not listed on IDEAS
- Barnichon, Regis, 2010. "Building a composite Help-Wanted Index," Economics Letters, Elsevier, vol. 109(3), pages 175-178, December.
- Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1, September.
When requesting a correction, please mention this item's handle: RePEc:bin:bpeajo:v:45:y:2012:i:2012-02:p:83-131. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Ambrosino)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.