Nonfarm payroll employment - whose better?

Nonfarm payrolls for February 2007 (released today, Friday March 9th at 8:30am) continued to trend up (+97,000). Details are here. Yesterday I noted that as of yesterday, the Economists' consensus was 100,000 and the CME Auction Market participants' consensus was 82,500. So who is the better forecaster? In this instance the Economists were better (error of 3,000 versus the derivatives auction results error of 14,500). For the Nonfarm payrolls (NFP) there are several forecasts that come from the CME auctions There was one more auction and therefore one more forecast before the release at 8:30am this morning. This auction gave an implied market forecast that was even more off the mark (75,500). I have maintained that, based on my research, over time the CME Auction Market participants' consensus outperforms the Economists' consensus. Gürkaynak and Wolfers (2006) conclude that “The evidence presented … shows that economic derivatives option prices are accurate and efficient predictors of the densities of underlying events” (p. 29). Seems it is time to test that hypothesis again. Here's what I'd like to do. Test:

• Which forecast best predicts the actual outcome, CME economic derivatives auctions or the Economists' consensus?
• Since, for the NFP there are several forecasts from economic derivatives auctions, do auctions closer to the release perform better than forecasts that are more stale?
• Does averaging the auction results produce a superior forecast?

There are a couple of definitions of a better forecast that may be pertinent here. One might be, as implied above, that is which forecast predicts the outcome better. However this assumes that the variable you are interested in is in fact the economic release (such as the NFP). But who really cares about the NFP? What most people care about is what it means to them. These economic statistics are indicators. Most investors care about how these indicators affect their portfolio of holdings. So one definition of a better forecast of NFP might be one that more accurately explains (or forecasts) movements in the financial variable of interest. I'm not sure the data will allow for a definitive test on all of these points, but this is my goal.

1. Gürkaynak, Refet S., Wolfers, Justin, (2006) “Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk” NBER Working Paper Series, NBER Working Paper 11929, January 2006.