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Understanding Gallup's Economic Measures

Understanding Gallup's Economic Measures

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's Employment/Underemployment Indexes provide continuous monitoring of U.S. employment and underemployment, and serve as a key adjunct to the U.S. government's monthly tracking. These indexes -- based on the combination of responses to a set of questions about employment status -- are designed to measure U.S. employment accurately, in accordance with International Conference of Labour Statisticians standards. Based on an individual's responses to the question series (some of which are asked of only a subset of respondents), Gallup classifies respondents into one of six employment categories: employed full time for an employer; employed full time for self; employed part time, but do not want to work full time; employed part time, but want to work full time; unemployed; and out of the workforce.

Gallup Good Jobs is a measure of those who are employed by an employer for at least 30 hours per week, calculated as a percentage of the total population. Underemployed respondents are those in the workforce who are either unemployed or employed part time, but want to work full time. Unemployed respondents are those within the underemployed group who are not employed, even for one hour a week, but are available and looking for work.

Gallup interviews 1,000 Americans daily -- or about 30,000 per month. Because of its Daily tracking of other political, business, and well-being measures, Gallup provides insights not available from any other source on the health, well-being, optimism, financial situations, and politics of those who are working or seeking work.

How Gallup's Unemployment Measure Differs from the U.S. Government's Measure

Gallup's Economic Confidence Index is based on the combined responses to two questions asking Americans, first, to rate economic conditions in the country today, and second, whether they think economic conditions in the country as a whole are getting better or getting worse. The Index is computed by adding the percentage of Americans rating current economic conditions (("excellent" + "good") minus "poor") to the percentage saying the economy is ("getting better" minus "getting worse"), and then dividing that sum by 2. The Index has a theoretical maximum value of +100 and a theoretical minimum value of -100. Values above zero indicate that more Americans have a positive than a negative view of the economy; values below zero indicate net-negative views, and zero indicates that positive and negative views are equal. Gallup measures Americans' economic confidence nightly as part of Gallup Daily tracking, and reports the Index in weekly and monthly averages in Gallup's ongoing reporting. Weekly averages are based on approximately 3,500 interviews with Americans, aged 18 and older; and monthly averages are based on approximately 15,000 interviews. From October 2000 through October 2011, the Index has correlated at a .95 level with the Reuters/University of Michigan Index of Consumer Sentiment and at a .82 level with the Conference Board's Consumer Confidence Index®. This is based on analysis of Gallup data from the first week of each month -- the period most comparable to the Conference Board's data-collection period and significantly overlapping with the Thomson Reuters/University of Michigan field period. In contrast to the Conference Board and Thomson Reuters/University of Michigan reports that are issued at the end of the month, Gallup's weekly reports are issued nearly in real time, providing the most timely insights available on consumer attitudes.

Gallup's Job Creation Index is based on employed Americans' estimates of their companies' hiring and firing practices. Gallup asks its sample of employed Americans each day 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. The resulting index -- computed on a daily and a weekly basis by subtracting the percentage of employers letting people go from the percentage hiring -- is a real-time indicator of the nation's employment picture across all industry and business sectors. 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. In some ways, Gallup's Job Creation Index is more meaningful than the government's weekly new jobless claims measure, given that not everyone who is laid off files for unemployment. The index may also pick up hiring trends days or weeks before they are manifested in the official unemployment rate or other lagging indicators. Finally, the index measures job creation (hiring) and job loss (letting go) on a continuous basis. This provides additional real-time insight not available from broadly aggregated indicators and unemployment data.

Gallup's Consumer Spending measure is calculated from responses to a basic question asking Americans each day to estimate 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 in which 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 exhibits similarly positive and substantial correlations to other government measures of retail sales. These positive correlations indicate that changes in Gallup's spending estimates are related to changes in both direction and magnitude of actual consumer spending as reported by the government. Further, Gallup's Consumer Spending measure provides estimates on a continuing basis, giving an early read on what the government eventually reports roughly two weeks after the close of each month. Gallup's continuous surveying allows for analysis of spending patterns on a daily and a weekly basis, which is particularly important to understanding seasonal variations in spending. The spending measure allows business and investment decisions to be based on essentially real-time information.

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