NFP Revisions, NB?

8:30 A.M. (EST), Friday, November 3, 2006 - Nonfarm payroll employment grew by 92,000 in October following gains of 148,000 in September and 230,000 in August (as revised).The final forecast from economic derivatives auction was 103.9k. As stated yesterday, the range of forecasts from survey data was 120-135 (thousand jobs) with 125k being the favourite prediction but a bit of skew to the upside gives an average forecast, from the surveys, of 127k. So the news (actual minus derivative distribution mean) is -11.9 with the derivatives-based forecast being more accurate than the survey forecasts. That the derivatives-based forecast was more accurate was not unusual, this is usually the case (See for example Gürkaynak & Wolfers - Equity and Bond Market Responses using Survey and Market-Based Expectations Refet S. Gürkaynak, Justin Wolfers, 2005 “Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk” pdf. As well as being more accurate the derivatives-based number provides more information as I described in the last post.

There was some sentiment today that the revisions meant that although the number was lower than expected (however defined), the revision was above expectations and this might affect financial markets as much or more than the news itself.

So far I have found that the economic derivative-based news is the best predictor of where and how much financial markets move.

The hypothesis about revisions is an easy one to test. I will address this in the near future.