The ILO nowcasting model: Using high-frequency data to track the impact of the COVID-19 pandemic on labour markets1

Abstract

The impact of the COVID-19 pandemic resulted in unprecedented labour market disruption, triggering the most severe global labour market crisis on record. The speed and depth of the crisis rendered labour force survey data unable to provide timely information. The ILO nowcasting model was designed to track the disruption in the world of work caused by the pandemic. This required: 1) filling data gaps, 2) increasing the timeliness of available data, and 3) focusing on an indicator that captured well the pandemic disruption: hours worked. The estimates obtained from the ILO nowcasting model have become the backbone of the empirical strategy behind the ILO Monitor on the World of Work publication series. The latest estimates corroborate that the pandemic induced very large declines in hours worked at an unprecedented speed. Furthermore, the recovery process has stalled, driven by a stagnant recovery in developing economies. The country-level input data and estimates of the ILO nowcasting model allow for complementary analysis, which was published in the ILO Monitor. The topics included the effects of COVID-19 testing and tracing, fiscal stimulus, and vaccination on labour market outcomes.

Appendices

“…The quarterly projections for the unemployment rate, the EPR, the LFPR and the ratio of hours worked to population aged 15-64 use high-frequency data such as confidence indices in addition to economic growth forecasts in order to test a series of models. The approach is very much in line with the direct nowcasting approach used to estimate hours worked (Gomis et al 2022). These models are evaluated using the model search routines described above, including splitting the data into training and evaluation samples.…”

“…For an in-depth methodological description please consult Gomis et al (2022). The model produces an estimate of the change in hours worked adjusted for population aged 15-64 relative to this baseline.…”