Macro investors have to deal with measurement error within government data. This is the second year in which we have seen major revisions to labor data. Last year, a major seasonal adjustment affected employment numbers. This year, there has been a significant change due to benchmark revisions. The two charts below provide evidence of what has happened to the labor data. The first chart shows that nonfarm payrolls have been revised down by approximately 1 million jobs. In the second chart, you can see the monthly change.
This new data provides further evidence of the K-shaped economy. Some of the revisions are based on demographics, so they do not translate into higher unemployment, but they do create a more confusing picture of the macroeconomic environment, which will impact bond returns in particular.
I use macro signals to improve my trend- and price-based signals, but when macro data are noisier, the value added by macro analysis diminishes.
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