Using QCEW Data to Estimate NFP in Wisconsin

Wisconsin released QCEW data yesterday. We can use this data to update the estimate of nonfarm payroll employment. Doing so worsens the employment performance through 2014.

I take QCEW private employment data from 2001M01-2014M12, seasonally adjust using ARIMA X-12 (multiplicative seasonal factors), to obtain the adjusted series. Both are presented below in Figure 1.

Figure 1: Wisconsin Quarterly Census of Employment and Wages private employment seasonally unadjusted (blue), and seasonally adjusted using ARIMA X-12 multiplicative terms (red). Source: DWD, and author’s calculations.

I then run a regression of log WI private nonfarm payroll employment on log seasonally adjusted QCEW private employment, over the 2001M01-2014M09 period (the most recently benchmarked state level NFP numbers are benchmarked through 2014M09). I use this relationship to estimate out-of-sample through 2014M12 (the last observation reported for QCEW yesterday was 2014M12). This fitted values and 90% band are shown in Figure 2.

Figure 2: Wisconsin private nonfarm payroll employment (blue), and predicted (red). Light blue shading denotes data used for regression. Source: DWD and author’s calculations.

This implies that the WI private NFP number for December 2014 will be around 2448, which compares to the currently reported value of 2460.