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Economic determinants of employment sentiment: A socio-demographic analysis for the euro area

Author

Listed:
  • Oscar Claveria

    (AQR-IREA, University of Barcelona, 08034 Barcelona, Spain.)

  • Ivana Lolic

    (University of Zagreb, Faculty of Economics and Business)

  • Enric Monte

    (Department of Signal Theory and Communications, Polytechnic University of Catalunya.)

  • Petar Soric

    (University of Zagreb, Faculty of Economics and Business)

Abstract

In this study we construct quarterly consumer confidence indicators of unemployment for the euro area using as input the consumer expectations for sixteen socio-demographic groups elicited from the Joint Harmonised EU Consumer Survey. First, we use symbolic regressions to link unemployment rates to qualitative expectations about a wide range of economic variables. By means of genetic programming we obtain the combination of expectations that best tracks the evolution of unemployment for each group of consumers. Second, we test the out-of-sample forecasting performance of the evolved expressions. Third, we use a state-space model with time-varying parameters to identify the main macroeconomic drivers of unemployment confidence and to evaluate whether the strength of the interplay between variables varies across the economic cycle. We analyse the differences across groups, obtaining better forecasts for respondents comprised in the first quartile with regards to the income of the household and respondents with at least secondary education. We also find that the questions regarding expected major purchases over the next 12 months and savings at present are by far, the variables that most frequently appear in the evolved expressions, hinting at their predictive potential to track the evolution of unemployment. For the economically deprived consumers, the confidence indicator seems to evolve independently of the macroeconomy. This finding is rather consistent throughout the economic cycle, with the exception of stock market returns, which governed unemployment confidence in the pre-crisis period.

Suggested Citation

  • Oscar Claveria & Ivana Lolic & Enric Monte & Petar Soric, 2020. "Economic determinants of employment sentiment: A socio-demographic analysis for the euro area," IREA Working Papers 202001, University of Barcelona, Research Institute of Applied Economics, revised Jan 2020.
    • Handle: RePEc:ira:wpaper:202001
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    References listed on IDEAS

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    1. Regis Barnichon & Christopher J. Nekarda, 2012. "The Ins and Outs of Forecasting Unemployment: Using Labor Force Flows to Forecast the Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 83-131.
    2. Mr. John C Bluedorn & Mr. Shekhar Aiyar & Mr. Romain A Duval & Davide Furceri & Mr. Daniel Garcia-Macia & Yi Ji & Mr. Davide Malacrino & Mr. Haonan Qu & Jesse Siminitz & Ms. Aleksandra Zdzienicka, 2019. "Strengthening the Euro Area: The Role of National Structural Reforms in Building Resilience," IMF Staff Discussion Notes 2019/005, International Monetary Fund.
    3. Ball, Laurence & Jalles, João Tovar & Loungani, Prakash, 2015. "Do forecasters believe in Okun’s Law? An assessment of unemployment and output forecasts," International Journal of Forecasting, Elsevier, vol. 31(1), pages 176-184.
    4. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    5. John C Bluedorn & Shekhar Aiyar & Romain A Duval & Davide Furceri & Daniel Garcia-Macia & Yi Ji & Davide Malacrino & Haonan Qu & Jesse Siminitz & Aleksandra Zdzienicka, 2019. "Strengthening the Euro Area; The Role of National Structural Reforms in Building Resilience," IMF Staff Discussion Notes 19/05, International Monetary Fund.
    6. BELTRAN, Helena & DURRE, Alain, 2003. "The determinants of consumer confidence: the case of United States and Belgium," LIDAM Discussion Papers CORE 2003053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Oscar Claveria, 2021. "Forecasting with Business and Consumer Survey Data," Forecasting, MDPI, vol. 3(1), pages 1-22, February.

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    Keywords

    Unemployment; Expectations; Consumer behaviour; Forecasting; Genetic programming; State-space models yield. JEL classification: C51; C53; C55; D12; E24; E27; J10.;
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