Originally published January 25, 2008
That’s what Chairman Jim Saxton (R-NJ) and his Joint Economic Committee advise anyway, and they seem to have a point. In their analysis of the merits of the various employment indicators in predicting recessions, they find that the participation rate with its laughable value of –161% is “actually bizarre” in that it tends to rise at the same rate during both expansions and recessions. That takes care of the booby prize. In terms of ability to predict recessions, balancing value and reliability, the initial UI series (weekly claims for unemployment insurance) ranked first, as did changes in the unemployment rate among the monthly indicators. Sad to say, the payroll and household series “are of no value as recession indicators.”
| The Best | ||
| Series | Value | Reliability |
| Initial UI claims | 76% | 0.5 |
| Employment/Population Ratio | 51% | 0.3 |
| Continuing UI Claims | 43% | 1.8 |
| Unemployment (CPS) | 27% | 0.8 |
| Unemployment (MA) | 15% | 1.6 |
| Unemployment (12M) | 0% | 2.5 |
| The Worst | ||
| Series | Value | Reliability |
| Labor Force Participation | -161% | 0.1 |
| Civilian Employment (MA) | -80% | 1.0 |
| Payroll Employment (real time) | -23% | 1.3 |
More here:
http://www.house.gov/jec/studies/2008/Employment%20Numbers%20as%20Recession%20Indicators.pdf
– Philippa Dunne & Doug Henwood
