I was alerted to a new labor dynamics measure published by Gallup (image below). Hat Tip to this nice explanatory column in the NYT's Economix blog by Alan Krueger (text below).
This pattern may be related to the main finding of Steven Davis, John Haltiwanger and Scott Schuh’s book, “Job Creation and Destruction.” Looking at manufacturing plants from 1972 to 1988, the economists found that changes in job destruction over the business cycle accounted for movements in employment to a greater extent than changes in job creation.
The Gallup data, however, also indicate a substantial drop in hiring in recent months. This finding is also consistent with the Bureau of Labor Statistics’ monthly Job Openings and Labor Turnover Survey, which shows a greater collapse in hiring than in the 2001 recession.
Not surprisingly, the gap between hiring and letting people go is strongly correlated with the number of new unemployment insurance claims each week. The correlation between the Gallup hiring/letting go gap and new (seasonally adjusted) U.I. claims is -0.85. This indicates that the Gallup series can be a powerful predictor of U.I. claims, which in turn is one of the best predictors of the monthly unemployment rate. Moreover, the Gallup data have the advantage of being computed daily, so they provide an early warning of where the labor market may be heading.
I think of UI claims as the best "early warning" signal of the real economy. So it's nice to have an early warning for the early warning!
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