Evaluating Short-Run Forecasting Properties of the KOF Employment Indicator for Switzerland in Real Time

This study investigates the usefulness of the business tendency surveys collected at the KOF institute for short-term forecasting of employment in Switzerland aggregated in the KOF Employment Indicator. We use the real time dataset in order to simulate the actual predictive process using only the information that was available at the time when predictions were made. We evaluate the presence of predictive content of the KOF Employment Indicator both for nowcasts that are published two months before the first official release and for one-quarter ahead forecasts published five months before the first official release. We find that inclusion of the KOF Employment Indicator leads to substantial improvement both in in-sample as well as, more importantly, in out-of-sample prediction accuracy. This conclusion holds both for nowcasts and one-quarter ahead forecasts