Unemployment Insurance Claims and Economic Activity

Economic forecasters pay especially close attention to labor market indicators during periods of economic uncertainty. Labor market data are thought to provide early evidence about changes in the course of the economy. This article examines whether monthly changes in labor market indicators are useful for predicting real GDP. It then examines whether weekly changes in initial and continuing unemployment insurance claims are useful for helping to predict changes in important labor market indicators. Incoming monthly data on nonfarm payroll jobs and the index of aggregate weekly hours help predict changes in real GDP growth, but data on the civilian unemployment rate do not. The authors also find that unemployment insurance claims help to predict changes in monthly labor variables. As others have found, these predictions work best in periods of recession. However, this article shows that there was also some predictive ability during the 1990s expansion.