PRINCETON, NJ -- U.S. employees' perceptions of the job situation at their companies remain negative, though a little less so last week than the week before, with Gallup's hiring measure at -4 for the week ending Jan. 24 -- slightly better than the prior week's -6. In turn, this suggests that the Labor Department will likely report Thursday that seasonally adjusted weekly jobless claims were down from last week's 589,000, but still far exceeded the 527,000 reported just two weeks ago.
Jobless Claims Likely to Be Down, but Still High
Even as major U.S. companies continue to announce major layoffs, a number of variables make it hard to predict the exact number of weekly jobless claims the Labor Department will report each Thursday. There is often a lag between layoff announcements and their realization. Further, the surge in claims last week may have reflected a balancing of the understated numbers reported during the holidays. Regardless, Gallup's new hiring measure suggests the job market continues to weaken even if Thursday's jobless claims are not as bad as last week's report.
In addition to the weekly net hiring estimate, Gallup also reports a four-week average. Gallup's four-week average jobless claims measure is not only more stable but is a better predictor of actual unemployment levels in the marketplace. The roll off of the artificially low weekly jobless claims numbers of the holiday period continues to distort the government's seasonally adjusted four-week average jobless claims reports a bit. As a result, Thursday's government report of the seasonally adjusted four-week average jobless claims is likely to show a substantial increase even as Gallup's weekly average of new hiring would indicate a small decline.
Jobs Losses as a Leading Indicator
Normally, jobs are seen as essentially a trailing indicator of economic performance. As the economy slows and after some lag, people lose their jobs, confirming the economic downturn. However, in the unfolding recession, job losses may be something of a leading indicator -- at least, in the job-driven phase of the current recession.
As job losses continue to mount, Americans' confidence in their own future employment will continue to decline, and the pullback in spending -- particularly on big-ticket items -- will continue. When jobs begin to stabilize and increase, consumer confidence and spending are likely to improve. This is why it is essential that the stimulus plan create jobs -- not just expand the social safety net.
In this regard, the jobs situation seems likely to continue deteriorating during the weeks ahead. The poor holiday sales mean that many retailers and small businesses are likely to need more financing than usual to get through the normally slow sales period at the beginning of the year. However, this essential financing may not be available, given the current financial crisis and associated credit crunch.
A lack of retail and small-business financing at this critical time could lead to numerous additional business closings. In turn, this would add to the already serious jobs crisis. It will be important to see whether the Federal Reserve has plans to support these financing needs when the Federal Open Market Committee reports on the results of its current meeting Wednesday afternoon. This is also an area where the banking bailout (TARP) funds could help preserve jobs.
Over the weeks and months ahead, jobs are likely to become an even bigger issue. As policy-makers respond, it is essential that they keep in mind that the private sector and particularly small business create "real" jobs. The federal government needs to facilitate that private-sector job creation -- not try to replace it.
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 four-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.