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The U.S. Nonfarm Payroll and the out-of-sample predictability of output growth for over six decades

Author

Listed:
  • Afees A. Salisu

    (Centre for Econometrics & Applied Research
    University of Pretoria)

  • Abeeb Olaniran

    (Centre for Econometrics & Applied Research)

Abstract

We examine the predictive prowess of the U.S. Nonfarm Payroll (USNFP) for output growth in the U.S. covering over six decades from 1947 to 2021. Using two different measures of output growth (with Gross Domestic Product growth being used for the main analysis and growth in Industrial Production Index for robustness check), our predictability results show that the U.S. Nonfarm Payroll offers some predictive information for output growth in the U.S. and the out-of-sample forecast results equally attest to the superiority of the USNFP-based model over the model that ignores it. Our findings have implications for policy directions in the U.S. and various national and regional governments, multilateral agencies and investors whose economic and financial conditions are directly or indirectly linked with the U.S. economy.

Suggested Citation

  • Afees A. Salisu & Abeeb Olaniran, 2022. "The U.S. Nonfarm Payroll and the out-of-sample predictability of output growth for over six decades," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(6), pages 4663-4673, December.
    • Handle: RePEc:spr:qualqt:v:56:y:2022:i:6:d:10.1007_s11135-022-01342-8
    DOI: 10.1007/s11135-022-01342-8
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    More about this item

    Keywords

    U.S. Nonfarm Payroll; Output growth; Predictability; Forecast evaluation;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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