'Massive (GOP) revisions' make report 'nonsense'
Tuesday, November 07 2006 @ 08:41 PM CST Views: 327
Analysts outraged over U.S. adjustments of employment data
TAVIA GRANT
U.S. non-farm payrolls data -- arguably the most closely watched indicator in the world's largest economy -- are revised so often and by so much that they can't be trusted, some strategists argued yesterday.
Their comments come after Friday's report for October showed huge upward revisions for job creation in August and September. And last month, the Bureau of Labour Statistics said 810,000 more jobs were created between March, 2005, and March, 2006, than originally thought -- the biggest revision ever made to the data.
"How can you trust a non-farm payroll report that shows such massive revisions -- we have never seen this before to such an extent," David Rosenberg, North American economist at Merrill Lynch & Co., railed in a note to clients.
The U.S. report -- which measures the creation of non-agricultural jobs -- is usually released on the first Friday of the month and provides the earliest economic snapshot of the previous month. It tends to be one of the top market-moving indicators, influencing stocks, bonds and currency markets in the U.S. and beyond.
Friday's report by the U.S. Labour Department revised September and August payrolls upwards by a total of 139,000 jobs. The news, which suggested the economy is faring better than many had suspected, sent the U.S. currency soaring as traders trimmed the odds of an imminent interest rate cut.
"We hope we have made our antipathy to this report clear over time: We find it utterly comical and at times almost contemptible that some in our business still wish to trade pending this report," Dennis Gartman wrote in his newsletter yesterday. "Such is nonsense, for the report itself is nonsense."
Given all the revisions and the speed at which the report is released, it's little wonder forecasts tend to be wildly off the mark. In 2004, for example, the average "miss" was 108,000 jobs, according to a Merrill Lynch analysis.
Despite the rumblings, economists and investors will continue to keep a close eye on non-farm payrolls because it's simply too comprehensive and too timely to ignore.
"What the revisions mean is that you should look at a trend in the data and never focus too much on one month of data or even a couple of months," said Bank of Montreal economist Sal Guatieri, adding that Friday's report is "causing people who had been bearish about the U.S. economy some headaches."
Mr. Gartman said he's increasingly relying on other research, such as manufacturing surveys, consumer sentiment and internal figures from the steel industry, for insight into the state of the economy.
Mark Chandler, fixed-income strategist at Royal Bank of Canada, also studies a range of reports, from details on finding jobs under the consumer confidence survey to average hourly wages and weekly jobless claims.
He took the recent revisions in stride.
"It's a fact of life and you just have to cast a larger net," he said. "If you'd looked at three or four of those indicators, you would have come up with a better picture."
While Mr. Gartman dismissed the monthly report as "nonsense," and said he'll "consign it to the trash-bin henceforth," not everyone is ready to throw it in the garbage just yet.
"The best thing to do is to take all the data with a grain of salt and hope they're pointing in the same direction when you try to draw conclusions," Mr. Chandler said.
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