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Economy
How Do Gallup's Economic Indexes Work?
Economy

How Do Gallup's Economic Indexes Work?

Note: As of July 31, 2017, Gallup will no longer routinely be measuring the following: consumer spending, job creation, Gallup Good Jobs, unemployment and underemployment.

Gallup monitors U.S. employment, economic confidence, job creation, and consumer spending as part of Gallup Daily tracking. Findings are based on interviews with 1,000 national adults in the U.S. conducted by telephone each night 350 days per year.

Gallup's Employment/Underemployment Indexes provide continuous monitoring of U.S. employment and underemployment. These indexes serve as a key adjunct to the U.S. government's monthly tracking.

Gallup bases its Economic Confidence Index on the combined responses to two questions asking Americans, first, to rate economic conditions in this country today, and second, whether they think economic conditions in the country as a whole are getting better or getting worse. This Index has a calculated maximum of 100 (if all Americans rate the current economy as excellent or good, and all Americans say the economy is getting better), and a minimum of -100 (if all Americans rate the current economy as poor, and all Americans say the economy is getting worse). The Index correlates at a .96 level with the Reuters/University of Michigan Index of Consumer Sentiment and at a .84 level with the Conference Board's Consumer Confidence Index.

Gallup bases its Job Creation Index on employed Americans' estimates of whether their companies 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 analysis indicates that the Job Creation Index is an excellent predictor of weekly jobless claims that the U.S. Labor Department reports each Thursday. The index has about a 90% chance of predicting the direction of seasonally adjusted initial weekly jobless claims and a better than 90% chance of predicting the direction of seasonally adjusted initial claims on a four-week average basis. It also has a better than 80% probability of projecting the direction of the unemployment rate as reported by the Labor Department on the first Friday of every month.

Gallup calculates its Consumer Spending measure from responses to a basic question asking Americans each day to report the amount of money they spent "yesterday," excluding the purchase of a home or an automobile or normal household bills. The result is a real-time indicator of discretionary retail spending fluctuations that are sensitive to shifts in the economic environment. Gallup's average monthly estimate of spending is correlated at the .65 level with the U.S. government's report of total U.S. retail sales (not seasonally adjusted), and it exhibits similarly positive and substantial correlations to other government measures of retail sales.

Read more about Gallup's economic measures.


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