Predictive Evaluation of Sectoral and Total Employment Based on Entrepreneurial Confidence Indicators

Abstract

We evaluate the ability of the monthly index of entrepreneurial confidence (IMCE) to predict the twelvemonth variation of total and sectoral employment. By focusing solely on the predictive relationship between employment and IMCE indicators —excluding from the analysis the autoregressive terms of the respective employment variables—, we find strong evidence of predictive power at the aggregate level and in the construction, trade and manufacturing sectors. When we incorporate in the analysis an autoregressive structure for employment, the additional predictive capacity of the IMCE indicators becomes more elusive and difficult to detect. However, there is evidence that the IMCE-Total has better predictive power than that found in the univariate structure of aggregate employment. By sectors, although the results are less robust than for the aggregate, the construction sector stands out for its fairly strong evidence of predictability while the mining sector emerges as one with little evidence of predictive ability.