US Nonfarm Private Payrolls: Dec 2012 Preview

A monthly increase of 177,000 for private nonfarm payrolls in December is expected in tomorrow’s update (8:30am eastern) from the Labor Department, based on The Capital Spectator’s average econometric forecast. That estimate is higher by roughly 20,000 to 30,000 compared with a pair of consensus forecasts published by Econoday.com and Briefing.com.


Here’s a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator’s projections.
010313DD.GIF
R-1: A linear regression model using one variable–ADP private payrolls–to predict the US Labor Department’s estimate of private payrolls. The computations are run in R.
VAR-8: A vector autoregression model that analyzes eight economic time series in search of interdependent relationships through history to predict private payrolls. The forecasts are run in R with the “vars” package using historical data for the following indicators: ISM Manufacturing Index, industrial production, aggregate weekly hours of production and nonsupervisory employees in the private sector, the stock market (S&P 500), real personal income excluding current transfer receipts, real personal consumption expenditures, spot oil prices, and the Treasury yield spread (10-year less 3-month T-bill).
ARIMA: An autoregressive integrated moving average model that analyzes the historical record of the target data series in R via the “forecast” package.
ES: An exponential smoothing model that analyzes the historical record of the target data series in R via the “forecast” package.

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