An Urban's Rural View

The monthly report on jobs and joblessness won't make its first-Friday-of-the-month appearance this month. Like most federal agencies, the labor department's Bureau of Labor Statistics had to furlough almost all of its employees.

The government shutdown likely will also put the kibosh on USDA's October 11 supply-and-demand report. USDA's World Agricultural Outlook Board and National Agricultural Statistics Service have also gone dark.

And those are just two of the scores of reports Uncle Sam's statistics mills won't crank out until Congress gets around to funding the government again. Which leads to a question: Who cares? Will anyone really miss these government reports?

Short answer: Yes, particularly traders in stocks and bonds and commodities will miss them. Traders' dependence on these numbers borders on addiction. And because that addiction isn't entirely healthy, there's something to be said for making them go without for a few weeks.

When government reports rely on survey samples rather than actual counts, which in a multi-trillion-dollar economy they must, there's an inevitable tradeoff between timeliness and accuracy. The government's first report is often a rough estimate that will be revised substantially in subsequent reports as harder data become available. In other words the first report is often just plain wrong. Accuracy takes time.

Traders—those who trade for a living, as opposed to investors or hedgers—don't care. They can make as much money trading on a headline that misstates the situation as on one that comes close to the truth. Revisions don't embarrass them; they can profit trading those headlines, too. The more headlines, the better.

As eloquent as DTN's senior analyst Darin Newsom has been in poking holes in USDA's reports, it's important to understand that the tradeoff between timeliness and accuracy isn't limited to USDA. Take the labor department's monthly jobs report.

Since 1979, according to The Wall Street Journal, the difference between the department's first monthly report of jobs growth and its third revision has averaged 57,000 jobs. The early estimates have more than once faked out the stock market.

For example, the Journal says, the September 2011 report on the jobs situation in August 2011 showed a disappointing zero growth. The Dow tumbled 253 points, wiping out about $800 billion in stock values.

"But jobs growth wasn't actually zero," the Journal says. "The payroll figure was later revised upward by 57,000 jobs, still below consensus expectations but not disastrous. Then it was raised again to 104,000, a figure that would have boosted stocks."

In the Journal's view the traders have no one to blame but themselves. They should stop jumping to conclusions and "consider weaning themselves from the highs and lows of short-term data releases."

Not much chance of that happening, I'd say. Traders are profit seekers, not truth seekers. As long as Washington is shut down they'll find other headlines to trade on. When Washington reopens, they'll trade on what Washington gives them. As Darin puts it, "I'm a realist. I know this will not last."

Still, a reminder to traders that their addiction isn't healthy can't be a bad thing. And those of us who do care about truth can console ourselves that the first reports we're missing might not have given us the real truth anyway. For that, we're better off waiting.

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