In mid-2014, we introduced the EMSI Job Forecast, a prediction of the previous month’s change in employment three days before the BLS releases its initial number. The goal of our forecast, which is based on a number of leading labor market indicators and data releases, is to give an early look at the current state of the labor market.
We release the job forecast the Tuesday before every monthly jobs report.
The February Job Forecast: +212K Jobs
February was another strong month for job growth, according to EMSI’s forecast. Our model shows that employers added 212,000 net jobs in February, an estimate that includes total non-farm payroll employment (government included). When factoring in the BLS’s revised numbers, the annual average change in employment is 267K (since February 2014), and this quarter (since November) was the strongest part of that year, reaching an average of 307K.
What’s Behind the Number?
Here are a few factors driving EMSI’s predicted jobs number:
- Real GDP grew 2.2% in the fourth quarter of 2014, which is 15% lower than the advanced estimate.
- Personal income increased during January 2015 by 0.3%, which is equal to the December rate.
- Initial unemployment claims increased by 11,500 last week, but the four-week seasonally adjusted average decreased around 9,370 from the previous month.
How Have We Performed?
We launched the forecast in August, but we’ve been tracking our model’s performance since we developed it in the summer of 2013. How have we fared?
BLS Comparison (In Thousands)
Since July 2013, EMSI’s average error is +/- 30,210 compared to the BLS benchmark. (Benchmarks are comprehensive counts of employment, primarily derived from unemployment insurance tax reports that nearly all employers are required to fill with state workforce agencies.)
What Else Are We Tracking?
Labor Force Participation Rate and Unemployment Rate
Labor force participation is a good indicator of economic health because it reveals the number of people who are employed and those who are looking for work.
When we look closely at the last couple of months, it seems the labor force participation rate is growing faster than the unemployment rate is falling; the participation rate from December 2014 to January 2015 grew from 62.7% to 62.9%, and the unemployment rate went from 5.6% to 5.7%.
However, from January 2014 to January 2015, the unemployment rate decreased 0.9%, and the participation rate during the same period hardly changed (63% to 62.9%). When looking at the year-to-year numbers, we see that the participation rate is experiencing a steady decline rather than the improvement that we might expect as we recover from the recession.
Labor Market Health
Between February 2001 and January 2008, the labor market improved by 5.6 million new jobs. That was before the recession hit. Then, from January 2008 to January 2015, we added only 2.5 million new jobs, leaving us with a shortfall of 2.7 million jobs that we would have had if the recession hadn’t happened. When will employment catch up to where it would be if the recession hadn’t hit? According to EMSI calculations, we can expect to catch up to where we would have been by June 2016.
The EMSI Job Forecast is calculated using a time series of leading indicators from federal data sources. Our model includes data on initial job claims from the Department of Labor, various economic indices, and employment data from the Bureau of Labor Statistics. The job forecast covers total non-farm payroll employment in the U.S., including private-sector and government jobs. EMSI’s goal is to predict the BLS’s change in employment in the most accurate way, with an eye toward the preliminary monthly figure and the final number.
Note: Our monthly job forecast methodology is not related in any way to our approach to producing quarterly employment projections by industry and occupation.
Emsi turns labor market data into useful information that helps organizations understand the connection between economies, people, and work. Using sound economic principles and good data, we build user-friendly services that help educational institutions, workforce planners, and regional developers (such as workforce boards, economic development offices, chambers of commerce, and utilities) build a better workforce and improve the economic conditions in their regions.