PRINCETON, NJ -- Gallup's Net New Hiring Activity measure shows U.S. employees' perceptions of the job situation at their companies worsened considerably last week -- more than reversing the slight improvement of the past two weeks. In turn, this suggests that Thursday's Labor Department report of first-time unemployment claims for the week ending Dec. 6 will not only exceed the 509,000 reported for the prior week, but actually surge past the 525,000 consensus estimate.
Job Losses Accelerating
Net new hiring (the percentage of employees saying their companies are hiring minus the percentage saying their companies are letting people go) fell from 6.9 points in the week ending Nov. 30 to 0.0 in the most recent week, ending Dec. 7. That is the worst reading thus far in 2008.
While a number of variables make it hard to predict the exact number of new unemployment claims the Labor Department will report on Thursday morning, Gallup figures suggest jobless claims will surge and are likely to hit a new high for the year -- surpassing the seasonally adjusted 543,000 of the week ending Nov. 15. The seasonally adjusted four-week average of Gallup's hiring measure also shows that four-week average jobless claims continued to increase during the week ending Dec. 6.
The Economy Is Plummeting
Probably the most disturbing aspect of the current economic decline is the speed of the plunge in economic activity. Gallup's hiring measure simply provides quantitative confirmation of repeated anecdotal evidence that jobs are disappearing at an unbelievable pace. As this process gains momentum, economists are being forced to continuously revise downward their forecasts for economy activity.
While the impact of the unfolding jobs recession has yet to be fully realized on Main Street, it is being anticipated in Washington D.C. Last week's report that the U.S. economy lost more than 500,000 jobs in November has not only encouraged President-elect Obama to become more outspoken about his economic stimulus plans, but has also silenced most of the potential opposition to such an effort. In a perverse form of logic, the rapid deterioration of the job situation and its political impact have encouraged Wall Street by greatly increasing the odds that the new stimulus effort will be huge and will be adopted quickly. In this regard, the surge in jobless claims later this week should only add to this political momentum.
Still, even with all the dire forecasts for the economy in the short term, no one has been fully prepared for the current pace of economic decline. However, the redeeming feature of this sharp decline may be that it will be short in duration, with things looking better by mid-year 2009.
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 and a better than 8-in-10 probability of predicting the direction of the 4-week average of 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.
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.