Still, seasonally adjusted unemployment claims continued to surge last week
PRINCETON, NJ -- U.S. employees' perceptions of the job situation at their companies got a little less grim as Gallup's Net New Hiring measure improved a little last week. Since Gallup's measure is inversely related to jobless claims, this suggests better than 7-in-10 odds that Wednesday's Labor Department report of first-time jobless benefits claims for the week ending Nov. 22 increased less than the 542,000 reported last week, and probably less than the 537,000 consensus estimate.
Hiring and Letting Go
On Monday, President-elect Barack Obama warned that the United States faces the loss of millions of jobs next year. Gallup's hiring measure tends to confirm these expectations: the percentage of employees reporting their companies are letting people go increased from 19.6% in October to 21.7% in the week ending Nov. 23, while the percentage reporting that their companies are hiring decreased from 30% to 27.4%. The results for last week are slightly less gruesome than those for the week before, with net new hiring (the percentage hiring minus the percentage letting go) improving from 3.0 in the week ending Nov. 16 to 5.7 in the week ending Nov. 23 -- explaining the projection of slightly lower weekly jobless claims.
Anticipating Jobless Claims
Gallup's hiring measure is based on aggregated interviews with a nationally representative sample of more than 2,000 U.S. workers each week. Gallup asks current full- and part-time employees whether their employers are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. Gallup's hiring measure is computed by subtracting the "letting go and reducing" percentage from the "hiring and expanding" percentage. The assumption is that employees across the country have a good feel for what's happening in their companies, and that these insider perceptions can yield a meaningful indication of the nation's job situation.
Using weekly results for 2008, Gallup's analysis suggests that its hiring measure has a better than 7-in-10 probability of correctly projecting the direction of weekly jobless claims. While a number of variables make it hard to predict the exact number of new unemployment claims the Labor Department will report on Wednesday morning, Gallup figures suggest jobless claims will be less than the 542,000 reported last week. At the same time, the seasonally adjusted four-week average of Gallup's hiring measure continued to decrease last week, suggesting an 8-in-10 probability that seasonally adjusted four-week average jobless claims continued to increase.
The fallout from the way the U.S. economy hit a wall in mid-September is being transmitted to Main Street with amazing speed. In this regard, unemployment measures that have always been thought of as trailing measures of economic activity -- simply confirming the strengthening or weakening of the U.S. economy -- may now be morphing into leading indicators. In turn, this suggests that the overall level of economic activity is likely to continue to fall at a precipitous pace over the weeks ahead.
This week, in likely recognition of how fast the Main Street economy is deteriorating, President-elect Obama and his economic team seemed to step into the economic leadership vacuum that has been plaguing the markets. In response, global equity markets surged. And, in another positive sign, Treasury Secretary Paulson and Federal Reserve Board Chairman Bernanke announced new programs to help stimulate consumer credit.
Gallup's economic data suggest that all of these efforts most likely are going to be too late to save the Christmas sales season. They are also unlikely to prevent a surge in job losses in the months ahead. However, aggressive actions by the Congress and current/future economic policy-makers may be able to begin the process of rebuilding public confidence in the U.S. economy and its future direction. Gallup's Daily economic tracking will provide a continuous monitoring of the success of any such efforts.
Gallup's Net New Hiring Activity measure was initiated in January 2008. It is an effort to assess U.S. job creation or elimination based on the self-reports of more than 2,000 individual employees aggregated each week about hiring and firing activity at their workplaces.
For results based on these samples, the maximum margin of sampling error is ±3 percentage point.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.