Constructing a new leading indicator for unemployment from a survey among German employment agencies

Abstract

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Experts, firms, consumers or even hard data? Forecasting employment in Germany

“…The new indicator (called IAB-Labor Market Barometer -here: LMB), based on the assessments of the CEO of each regional entity of the Federal Employment Agency (FEA), produces lower forecasting errors in comparison to the Ifo Employment Barometer (IEB) or new orders in manufacturing. Since the IEB is a leading indicator for employment growth instead of unemployment changes, our paper largely mirrors the study by Hutter and Weber (2015) and evaluates the same indicators as in their article on employment growth in Germany. We find that the IEB performs better in terms of forecasting employment growth compared to the newly developed LMB.…”

“…To come as close as possible to the study by Hutter and Weber (2015), we use the same indicators as they did (the IEB, the LMB, consumers' unemployment expectations, inflation, nominal new orders in manufacturing and registered vacancies). We, however, add three more indicators: a modified IEB, real new orders in manufacturing and industrial production.…”

“…2 Recently, the study by Hutter and Weber (2015) compares a newly developed and innovative indicator for forecasting unemployment changes with the accuracy of rather 'traditional' indicators. The new indicator (called IAB-Labor Market Barometer -here: LMB), based on the assessments of the CEO of each regional entity of the Federal Employment Agency (FEA), produces lower forecasting errors in comparison to the Ifo Employment Barometer (IEB) or new orders in manufacturing.…”

“…In this paper, we forecast employment growth for Germany with data for the period from November 2008 to November 2015. Hutter and Weber (2015) introduced an innovative unemployment indicator and evaluate the performance of several leading indicators, including the Ifo Employment Barometer, to predict unemployment changes. Since the Ifo Employment Barometer focuses on employment growth instead of unemployment developments, we mirror the study by Hutter and Weber (2015).…”

“…Hutter and Weber (2015) introduced an innovative unemployment indicator and evaluate the performance of several leading indicators, including the Ifo Employment Barometer, to predict unemployment changes. Since the Ifo Employment Barometer focuses on employment growth instead of unemployment developments, we mirror the study by Hutter and Weber (2015). It turns out that in our case, and in contrast to their article, the Ifo Employment Barometer outperforms their newly developed indicator.…”