US Nonfarm Private Payrolls: October 2013 Preview

|
Includes: IEF, SPY
by: James Picerno

Private nonfarm payrolls in the US are projected to increase by 133,000 (seasonally adjusted) in tomorrow's October update from the Labor Department, according to The Capital Spectator's average econometric point forecast. The projected gain is slightly higher than the reported increase of 126,000 for September. Meanwhile, The Capital Spectator's average October projection is slightly higher than a pair of consensus forecasts, based on surveys of economists.

Note that one of the forecast models (R-1B) has been omitted this month due to questionable reliability of the October data for initial jobless claims (for details, see this news report). In addition, today's preview introduces a new model (R-2) for estimating private payrolls based on analyzing the employment components of the ISM indexes that track the manufacturing and non-manufacturing (services) sectors. For a brief summary, see the definitions below.

Here's a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator's projections:

07nov2013.a

VAR-6: A vector autoregression model that analyzes six economic time series in context with private payrolls. The six additional series: ISM Manufacturing Index, industrial production, aggregate weekly hours of production and nonsupervisory employees in the private sector, the stock market (S&P 500), spot oil prices, and the Treasury yield spread (10-year less 3-month T-bill). The forecasts are run in R with the "vars" package.

ARIMA: An autoregressive integrated moving average model that analyzes the historical record of private payrolls in R via the "forecast" package.

ES: An exponential smoothing model that analyzes the historical record of private payrolls in R via the "forecast" package.

R-1A: A linear regression model that analyzes the historical record of ADP private payrolls in context with the Labor Department's estimate of US private payrolls. The historical relationship between the variables is applied to the more recently updated ADP data to project the government's estimate of private payrolls. The computations are run in R.

R-1B: A linear regression model that analyzes the historical record of initial jobless claims (monthly average) in context with the Labor Department's estimate of US private payrolls. The historical relationship between the variables is applied to the more recently updated jobless claims data to project the government's estimate of private payrolls. The computations are run in R.

R-2: A linear regression model that analyzes the historical record of the employment components of the ISM Manufacturing and Non-Manufacturing indexes in context with the Labor Department's estimate of US private payrolls. The historical relationship between the variables is applied to the more recently updated ISM employment data to project the government's estimate of private payrolls. The computations are run in R.