IDEAS home Printed from
   My bibliography  Save this paper

Constructing NEO: A Near-term Employment Outlook


  • Edda Claus


The goal of this paper was to create a short-term forecasting model for total employment in Canada. In an attempt to increase forecasting accuracy compared to typical forecasting models, a composite index of leading indicators of employment was created. The index performs very well in signalling cyclical changes in employment and was included, as an explanatory variable, in a quarterly indicator model of employment. One-quarter out-of-sample forecasts were generated over the period of 1993Q1 to 1999Q3. The model performs extremely well. The mean absolute forecast error over the testing period is only thirty-six per cent of the average quarterly changes in employment over that same period. The out-of-sample forecasts were also compared to forecasts of four alternative models. The indicator model clearly outperforms the alternative models in terms of forecasting performance and promises to be an effective tool for forecasting quarterly changes in Canadian employment. L’objectif de cette étude était de construire un modèle de prévision à court terme de l’emploi total au Canada. Afin de réduire l’erreur de prévision telle que révèlent les modèles traditionnels, j’ai créé un indice composite d’indicateurs avancés de l’emploi. L’indice signale clairement les changements cycliques dans l’emploi canadien. Je l’ai alors inclus, comme variable explicative, dans un modèle d’indicateur. Mes résultats empiriques montrent que la performance prédictive de ce modèle est très bonne. L’erreur moyenne absolue des prévisions hors échantillon un trimestre à l’avance pour la période de 1993T1 à 1999T3 n’est que trente-six pour cent de la variation moyenne de l’emploi au cours de cette même période. Pour mettre à l’épreuve la performance relative de mon modèle, j’ai comparé ces prévisions à ceux de quatre modèles alternatifs. Le modèle d’indicateur est clairement dominant au niveau des prévisions un trimestre à l’avance. Bref, le modèle indicateur pourrait devenir un outil très utile pour prédire, à court terme, les variations de l’emploi canadien.

Suggested Citation

  • Edda Claus, "undated". "Constructing NEO: A Near-term Employment Outlook," Working Papers-Department of Finance Canada 2001-07, Department of Finance Canada.
  • Handle: RePEc:fca:wpfnca:2001-07

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Burcu Gurcihan Yunculer & Gonul Sengul & Arzu Yavuz, 2014. "A Quest for Leading Indicators of the Turkish Unemployment Rate," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 14(1), pages 23-45.
    2. Edda Claus & Iris Claus, 2007. "Six Leading Indexes Of New Zealand Employment," CAMA Working Papers 2007-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fca:wpfnca:2001-07. 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: (Gustavo Durango). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.