Market Learning: Adjusting NFP for Hurricanes

Today at 14.30 CET the U.S. employment report is due. Economists expect about 150 thousand jobs to have been added during last month. It is however unclear how much of the effects from hurricanes such as Ivan that were visible at the time these expectations were formed. Historically, severe hurricanes in the Mexican Gulf has had an important effect on the non-farm pay rolls numbers, making them much lower that the consensus estimates. And looking at the worst hurricanes, it seems that even the bond-market has been surprised by the hurricane effects, trading up bond-prices (yields down), on the day the non-farm payroll figures have been released far below estimates because of the storm impact. However, now they seem to have learned the lesson. Following are the yield changes on 10-year U.S. treasuries on NFP announcement days after severe storms. All the NFP figures, though not shown in the table, were announced far below the estimates, and then later revised upwards.

Date......Hurricane.....10-yr UST yield chg bps.
Aug 1992.......Andrew.......-12.3
Sep 1996.......Fran.........-11.4
Sep 1998.......Bonnie.......-1.8
Sep 1999.......Floyd........-0.6

For each time, the market has been successively less surprised by what the hurricane has done to the statistics. That said, keep in mind that there is only four observations in the table. Anything could happen today!

No comments:

Popular Posts