A Consensus of Economists

How well do economists predict the U.S. nonfarm payrolls? I picked up the consensus forecast for the NFP from the NASDAQ website (from Econoday). The latest report is here.

There are 63 monthly reports back to January 2002 (there may be more but this is all I pulled for analysis), all have actual and the consensus forecast. The most recent 4o reports have the range of the forecasts as well.

The average error was 24,000.

This appears to be a biased forecast (on average the error should be zero. With a standard error or 10,000, this is significantly different from zero at the 95% level). So despite studying the dismal science, economists are overall an optimistic bunch. In fact they are overly optimistic.

The biggest oopsie was 328,000 (in March 2003 when the actual was -308,000 and the expected was 20,000).

In the last 40 months the actual fell within the range of the expectations 20 times. So 50% of the time the actual was inside the range. That is not a great record.

Next, I'll look at the economic derivatives forecast performance and provide some comparisons.