Does it make sense to react to today’s employment data?
With rates rising and recession fears growing, economic numbers have become increasingly important as they should. Economic numbers are the clues that investors will use to determine the most likely path the economy will take. No economic number is more important than Employment. The two goals of the FED are full employment and controlled inflation.
History suggests that we should take the current employment data with a healthy dose of salt, because of the size and consistency of revisions. 43 years of monthly data and revisions are in the attached document. Using absolute numbers, the average size of monthly revision is over 45,000. The average absolute percentage revision over the past 43 years is 73% and 68% for the past 20 years. These are large revisions. The impact of these revisions may be less as they are taken over a multi-month period, but that does not reduce the caution of putting too much weight on any one monthly number.
We provide the Non-Farm data for the past 2 years below as an example. This period is actually better than the entire history in terms of revisions, but it still shows examples of giant revisions to the preliminary numbers.
