Labour market uncertainty after the irruption of COVID-19.

This paper examines the evolution of labour market uncertainty after the irruption of the COVID-19 pandemic in European countries. Since uncertainty is not directly observable, we use two alternative methods to directly approximate it. Both approaches are based on qualitative expectations elicited form the consumer survey conducted by the European Commission. On the one hand, following (Dibiasi and Iselin in Empir Econ 61:2113-2141, 2021), we use the share of consumers unable to formalise expectations about unemployment (Knightian-type uncertainty). On the other, we use the geometric discrepancy indicator proposed by (Claveria in Empirica 48:483-505, 2021) to quantify the proportion of disagreement in business and consumer expectations. We find that both uncertainty measures covary across the 22 European countries analysed. Although we observe differences in the evolution across countries, in most cases the perception of labour market uncertainty peaked before the outbreak of the crisis, plummeted during the first months of the lockdown, and started rising again. When testing for cointegration with the unemployment rate, we find that both indicators exhibit a long-term relationship with unemployment in most countries. The impact of both indicators on unemployment is characterised by considerable asymmetries, showing a more intense reaction to decreases in the level of labour market uncertainty. While this finding may seem counterintuitive at first sight, it somehow reflects the fact that during recessive periods, the level of disagreement in consumer unemployment expectations drops considerably.

Labour market uncertainty after the irruption of COVID-19

This paper examines the evolution of labour market uncertainty after the irruption of the COVID-19 pandemic in European countries. Since uncertainty is not directly observable, we use two alternative methods to directly approximate it. Both approaches are based on qualitative expectations elicited form the consumer survey conducted by the European Commission. On the one hand, following (Dibiasi and Iselin in Empir Econ 61:2113–2141, 2021), we use the share of consumers unable to formalise expectations about unemployment (Knightian-type uncertainty). On the other, we use the geometric discrepancy indicator proposed by (Claveria in Empirica 48:483–505, 2021) to quantify the proportion of disagreement in business and consumer expectations. We find that both uncertainty measures covary across the 22 European countries analysed. Although we observe differences in the evolution across countries, in most cases the perception of labour market uncertainty peaked before the outbreak of the crisis, plummeted during the first months of the lockdown, and started rising again. When testing for cointegration with the unemployment rate, we find that both indicators exhibit a long-term relationship with unemployment in most countries. The impact of both indicators on unemployment is characterised by considerable asymmetries, showing a more intense reaction to decreases in the level of labour market uncertainty. While this finding may seem counterintuitive at first sight, it somehow reflects the fact that during recessive periods, the level of disagreement in consumer unemployment expectations drops considerably.

Forecasting with Business and Consumer Survey Data

In a context of growing uncertainty caused by the COVID-19 pandemic, the opinion of businesses and consumers about the expected development of the main variables that affect their activity becomes essential for economic forecasting. In this paper, we review the research carried out in this field, placing special emphasis on the recent lines of work focused on the exploitation of the predictive content of economic tendency surveys. The study concludes with an evaluation of the forecasting performance of quarterly unemployment expectations for the euro area, which are obtained by means of machine learning methods. The analysis reveals the potential of new analytical techniques for the analysis of business and consumer surveys for economic forecasting.