Nowcasting employment in the euro area

Marta Banbura, Irina Belousova, Katalin Bodnár and Mate Toth

No 2815, Working Paper Series from European Central Bank

Abstract: Euro area labour market variables are published with a considerable lag, longer than in the case of real GDP. We develop a suite of models to provide a more timely estimate (nowcast) of euro area quarterly employment growth based on a broad range of monthly indicators. The suite includes a batch of different dynamic factor model and bridge equation specifications. We evaluate it in real time over 2013-2022 and find that (i) monthly indicators provide useful information for a timely assessment of employment developments with unemployment rates and sentiment indicators containing most of the relevant information, (ii) the performance of small-scale models is comparable to those based on a larger information set, (iii) the suite performs favourably compared to the Eurosystem/ECB staff macroeconomic projections,(iv) forecasting performance deteriorates temporarily at the initial stage of the COVID-19 pandemic period, but the models outperform the benchmarks again thereafter. JEL Classification: C53, E24, E32, E37

Keywords: forecasting; mixed frequency; real-time data (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-eec
Note: 810771
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232815

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