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This paper constructs a composite index of leading indicators of New Zealand employment. The choice of variables and their weights in the composite index are determined by their concordance with employment. The composite index is included in an indicator model to forecast quarterly employment growth. The indicator model explains about 67 percent of the quarterly variation in employment, in sample, and correctly predicted the direction of next period employment almost 80 percent of the time, out of sample.
We would like to thank Richard Downing, Leo Krippner and Robert Lamy for valuable comments and Joanne Archibald for helpful suggestions about the data. The paper has also benefited from comments by participants of a seminar at the Reserve Bank of New Zealand and the 2001 Australasian Macroeconomic Workshop in Adelaide and two anonymous referees.
The views expressed in this Working Paper are those of the author(s) and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy advice, but with a view to inform and stimulate wider debate.