By Charles Thibault on December 7, 2009 in BLS Nonfarm Employment.

There were two important pieces of information in this month's BLS Employment Situation Summary. First, Nonfarm Employment dropped by only 11,000 – much better than Consensus Estimate that sat at -100,000 and our forecast of -155,000. Second, employment drops from the two previous months were revised upwards: 80,000 fewer people were out of work in September than originally reported, and 79,000 fewer people were out of work in October than originally reported. Together, this month's employment contraction of only 11,000 workers and those two positive revisions of about 80,000  put the US economy much closer to employment growth than what was thought just last week.

That's great news for the economy at large, but bad news for professional forecasters. BLS revisions have a direct impact on "what our model would have said given this new information". Our forecast for November, given the revised data in this month's report, would have been a drop of 79,000 nonfarm workers instead of a drop of 155,000.

Most forecasting models will include lagged values of the dependent variable, in addition to any proprietary or public information forecasters have access to. WANTED's forecasting model, for example, includes Nonfarm Employment, Unemployment Insurance Claims, and our Hiring Demand Indicators (number of new online job ads posted on the internet).

The table below shows the information available at the time of our forecast, the information available in the most recent Employment Situation Summary, and our forecasts based on those two different sets of data:

This "relative difference" in our forecast is almost exactly the same as the BLS's own revisions (76 vs. 79/80).

Read more »