Nowcasting Unemployment Insurance Claims in the Time of COVID-19

35 Pages Posted: 7 Jul 2020 Last revised: 13 Aug 2020

See all articles by William D. Larson

William D. Larson

Federal Housing Finance Agency

Tara M. Sinclair

George Washington University - Department of Economics; George Washington University - Elliott School of International Affairs (ESIA); George Washington University - Institute For International Economic Policy (GWIIEP); George Washington University - Research Program on Forecasting; George Washington University - George Washington Institute of Public Policy (GWIPP); Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA); Halle Institute for Economic Research

Date Written: July 2, 2020

Abstract

Near term forecasts, also called nowcasts, are most challenging but also most important when the economy experiences an abrupt change. In this paper, we explore the performance of models with different information sets and data structures in order to best nowcast US initial unemployment claims in spring of 2020 in the midst of the COVID-19 pandemic. We show that the best model, particularly near the structural break in claims, is a state-level panel model that includes dummy variables to capture the variation in timing of state-of-emergency declarations. Autoregressive models perform poorly at first but catch up relatively quickly. Models including Google Trends are outperformed by alternative models in nearly all periods. Our results suggest that in times of structural change there is a bias-variance tradeoff. Early on, simple approaches to exploit relevant information in the cross sectional dimension improve forecasts, but in later periods the efficiency of autoregressive models dominates.

Keywords: panel forecasting, time series forecasting, forecast evaluation, structural breaks, Google Trends

JEL Classification: C53, E24, E27, J64, R23

Suggested Citation

Larson, William D. and Sinclair, Tara M., Nowcasting Unemployment Insurance Claims in the Time of COVID-19 (July 2, 2020). CAMA Working Paper No. 63/2020, Available at SSRN: https://ssrn.com/abstract=3641296 or http://dx.doi.org/10.2139/ssrn.3641296

William D. Larson

Federal Housing Finance Agency ( email )

400 7th Street SW
Washington, DC 20552
United States

Tara M. Sinclair (Contact Author)

George Washington University - Department of Economics ( email )

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HOME PAGE: http://home.gwu.edu/~tsinc/

George Washington University - Elliott School of International Affairs (ESIA) ( email )

2201 G Street, N.W.
Washington, DC 20052
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202-994-7988 (Phone)
202-994-6147 (Fax)

HOME PAGE: http://home.gwu.edu/~tsinc/

George Washington University - Institute For International Economic Policy (GWIIEP) ( email )

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George Washington University - Research Program on Forecasting ( email )

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George Washington University - George Washington Institute of Public Policy (GWIPP) ( email )


United States

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

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Australia

Halle Institute for Economic Research ( email )

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