Under exceptional circumstances, WANTED Technologies will withhold its forecast of US Total Nonfarm Employment for January 2010, as reported by the Bureau of Labor Statistics.
Every year, the BLS revises the entire history of US employment in what it calls "Annual Benchmark Revisions". These revisions create a break in the data series: forecasts of month-over-month changes aren't particularly useful when there isn't a 'next month' in the series, or when the data series is only a month old. This is what happens when the BLS revises its US employment time series – the old series ended, and a new, restated one begins.
Additionally, annual revisions are released at the same time as the monthly Employment Situation Summary report which contains the data we're forecasting. In other words, not only would we be forecasting a number for a series that's no longer being used, we'd be forecasting the future values of a dataset we don't have access to.
Additionally, we are expecting substantial revisions to 2009 employment numbers because of the volatility in the US economy over the past 16 months.
In combination, these three factors, have prompted us to withhold our monthly forecast:
- The additional forecast standard error introduced by the annual Benchmarking process is 56,000 workers per month (estimated over the past 8 years). Revisions are greater during economically volatile periods: for the previous recession (2002) the benchmarking related forecast standard error was 107,000 workers per month.
- The annual benchmarking revision process creates a dataset which we don't have access to but whose future value we must predict. It would be possible to forecast employment changes if we had access to the revised series before the release of the Employment Situation report; unfortunately revisions are released concurrently with the Employment Situation Summary.
- Employment gains are "within two standard errors" of our forecast. When changes are around zero, there's a qualitatively different interpretation of changes in employment. For example, we wouldn't interpret two competing forecasts of -50,000 and +50,000 the same as we would two competing forecasts of +450,000 and +550,000 – even though both sets of forecasts are 100,000 workers apart. When exiting a recession, 'which side of zero' you are on is more important than your 'number', creating an asymmetric penalty response function to a forecast.
The BLS will release the January Employment Situation on February 5th, 2010, at 8:30am ET.
Several internal BLS data elements are revisited in detail during the Annual Benchmark Revisions:
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