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« Weighing the Week Ahead: Bring on the (Economic) Evidence! | Main | Weighing the Week Ahead: Bernanke's Next Move? »

May 31, 2012

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Octavio Richetta

IMHO, the TREND not just in the US job data, but in the WW economic data is very concerning and should not be taken lightly.

Intelligent assessment of the economic situation and markets requires more than just looking at historical data, on which, even forward looking indicators, are based.

Fortunately/unfortunately forecasting/assessing the economic future is more an art than a science; thus cannot be 100% objective/rely 100% on data but also on assessing how these variables will interact in the future. Miracles do not happen.

So far I have been able to skip the US Tech bubble and the US housing bubble while also beating the S&P500 in the last 15 years. And now I am trying my best not to get run over by the aftermath of the 2008 crisis.

As I have posted at this site previously, the effect of the European Sovereign Debt Crisis, which I label the Euro Bubble, and the China hard-landing, on the fragile US economy should not be taken lightly.

wkevinw

I did a study of revisions of the GDP and the jobs data a couple of years ago. (Can't recall where I put the data). Anyway, in terms of being reliable enough to use as trading signals, three words: they are not.

The revisions are enormous. One example that is interesting is what happened in 2000-2001. I believe the first GDP estimate showed three consecutive negative quarters, and the revision showed the middle quarter to be positive. So, by the two negative consecutive quarters recession criterion, there wasn't one: after revision.

Thanks.

Charlie

Hi Jeff,

Always look forward to your posts on US employment.

I also like ADP's approach. However, they did change their methodology in 2008 (http://adpemploymentreport.com/PDF/REVISED_METHODOLOGY_DEC_2008.pdf) to include laggged NFP so I guess it is not as much cheating any longer in using ADP to forecast NFP since that seems to be what the ADP themselves are trying to do.

From the pdf:
"The BLS data (as currently reported) for growth of employment by industry is regressed on: (a) the matched-sample growth rates by industry based on the ADP data; (b) a weighted average of the historical average growth rates of employment in each cell based on QCEW data; (c) a weighted average of the historical average growth rates of employment in each cell based on the ADP data; (d) lagged values of BLS estimates of growth of employment by industry; (e) initial unemployment claims filed during the week immediately before the week that includes the 12th of the month."

Regards,
Charlie

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