NFP Day: The Most Over-Analyzed, Over-Emphasized, Least-Understood Data Point

Once again, with feeling:

The most over-analyzed, over-emphasized, least-understood data point of the month comes out today. I guess we could probably add “over-traded” to that list.

Why do am I critical of how we discuss this point?

Consider these reasons:

1) The overall trend in hiring is what matters, not a single snapshot

2) In a Labor Force of 140,000,000 people, the change in net monthly hires minus fires is a miniscule one tenth of one percent. (i.e., 140k out of 140m)

3) If you use the correct long term hiring cycles, you cans get a pretty good estimate of likely hiring patterns. Following credit crises, we should expect a mediocre but improving job creation.

4) The overall NFP number is subject to heavy revisions as new data becomes available; hence, the preliminary number is unreliable.

5) Like all models, the BLS model is flawed, but not useless. That is why we prefer to look at the overall trend versus any specific datapoint (That also eliminates the Recency Effect).

6) While Hiring is a lagging indicator, we can look at the 3 leading components each month to see if we are improving or backsliding: Hours Worked, Wages, Temp Help.

Okay, let’s take a quick look at the numbers:

Consensus estimates for Payrolls are to see gains of 146,000 workers versus December’s +103,000 (Bloomberg survey). The economists also expect the jobless rate to rise one tick to 9.5%.


BLS data released at 8:30am

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