The market is gearing up for the April jobs report on Friday, which will give an indication of whether the economy is bouncing back in the second quarter, and how many jobs America is creating.
But just how good of an indication will it be?
The Bureau of Labor Statistics' monthly Employment Situation presents numbers compiled from two data sources: the payroll records of some 143,000 businesses and a telephone survey of about 60,000 households. The numbers are then seasonally adjusted. And over the next two months, the BLS rejiggers the numbers "to incorporate additional sample reports and recalculated adjustment factors," which can easily lead to big shifts in the data.
The BLS makes no bones about the precision of its figures. The bureau says the nonfarm payrolls number has a 90 percent confidence interval, meaning there is a 90 percent chance that the actual number of jobs created is within 105,000 jobs of the estimate, in either direction.
If "the reported nonfarm employment rise was 250,000, then… it is likely (at least a 90-percent chance) that nonfarm employment had, in fact, risen that month," the BLS writes in an explanatory note, employing what is in fact a rather striking example.
The employment report is often a big market mover. But there is enough mystery surrounding the widely watched number that the report is basically untradeable, says Vincent Mayeski, an algorithmic trader whose company, TradeXoft, develops trading and market-making algorithms that are used in Treasury markets.