There’s a theory that headline economic data headlines don’t tell the story


Watch the revisions

Economic data is overrated.

Don’t get me wrong, data often leads to big moves in markets and once-in-awhile; a change in the trend. Much more often it’s noise and a mash-up of confusing noise.

So what’s a better way to find the signal. One theory is that revisions offer better clues.

If you look at the past 5 non-farm payrolls reports, they have all featured a downward revision to the prior. In that timeframe, benchmark revisions also cut a half-million jobs.

The above chart shows a consistent gap between the initial release (titled ‘actual’ here) and the revised number. What’s also interesting is that if you go back a year the revisions were consistently higher and that was followed by a series of strong numbers. Remember this all came in the context of economists and the Fed forecasting a slowdown to an average of +100K jobs.

It’s not just jobs data, it’s something that applies all economic data. Keep an eye on it.


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