NFP Report Preview: Goldman Prediction is Outlier

February 5, 2010 7:45 am

There is a very recent divergence of the economists and analysts who are looking forward to the Friday NFP employment numbers. For some time there was unanimous consensus that we would see growth show up in the next NFP print.

But, after the lousy initial claims report that came out yesterday (-480k v -455k expectations), Goldman Sachs (GS) revised their estimate to a loss of 25,000 jobs. The chart below illustrates the trend along with the individual estimates. Deutsche Bank has been ahead of the pack (and wrong) with their predictions for greater job growth.

The real question that is on the minds of investors is what will be the actual unemployment rate. The current consensus is showing that it will remain at 10%. But, we have been seeing signs that job openings are starting to sprout up and that may actually turn out to be a headwind for the unemployment rate as more people will be considered to be in the workforce – or at least looking for a job.

Therefore, we would not be surprised to see the unemployment rate jump up to within the range of 10.2% -10.4%. Of course there may be other statistical abnormalities that could keep the rate down, so we will need to read the fine print when the report is released.

More importantly, there have been several warning notices that were blasted that are suggesting that the BLS surveys have not been altogether accurate in their assessment of the number of people unemployed. The White House announced today that there “might” be a higher number of total unemployed than has been actually reported. The BLS is now telling us that they have a better gauge and will be adjusting the records. (No kidding!)

In an effort to explain the gigantic errors and to shed some light on the actual number of unemployed, the BLS recently posted a press release on their site. So, it appears that we will need to add 824,000 unemployed to the previous total reported. (actually, they were always there, just “hidden” by statistical anomalies that made the numbers “look” better)

What a joke!

(See table 1 and comments below)

From the

In accordance with usual practice, the Bureau of Labor Statistics (BLS) is announcing the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series.  The final benchmark revision will be issued on February 5, 2010, with the publication of the January 2010 Employment Situation news release.

Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file.  For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2009 total nonfarm employment of 824,000 (0.6 percent).

Table 1 shows the March 2009 preliminary benchmark revisions by major industry sector. As is typically the case, many of the individual industry series show larger percentage revisions than the total nonfarm series, primarily because statistical sampling error is greater at more detailed levels than at a total level.


Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.

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