One would think that with all the technological improvement in the last few years and the ability to gather more data related to the employment landscape of the US economy, that forecasting of the monthly Non-Farm Payrolls report would be improving. For several years that was the case, but lately not so much. Take the last six months, for example. In the six Non-Farm Payrolls reports that have been released so far in 2019, the actual reported readings versus expectations have been +128K, +139K, -160K, +19k, +73k, and -100K, respectively. There was a time when it was pretty uncommon for Non-Farm Payrolls to be more than 100K above or below the consensus reading. Recently, though, that has been the norm, and over the last six months, the actual reported reading has been above or below consensus expectations by an average of 103K!
Using our Economic Indicators tool, we created the chart below which shows the six-month average spread between the actual and reported reading in Non-Farm Payrolls going back to the late 1990s. From 1999 through the early 2000s, there were multiple periods where the average spread topped 100K. Beginning in early 2005, though, the spread dropped below 100K and remained that way for a number of years, averaging just 50K from the start of 2005 through the end of last year. Economists were really on a roll in their forecasting! This year, though, the pattern has shifted in a big way, and through this morning’s report, the six-month average now stands at 103K – the highest reading since December 2004. We realize that there have been a number of macro-headwinds (government shutdown in late 2018 and tariffs this year) that have made the forecasting process more difficult, but it has been a bad few months for forecasting. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.