Tomorrow is Employment Data Day!

Usually, the first Friday of each month brings us the Employment Situation report from the US Bureau of Labor Statistics, affectionately known to traders and the media as "non-farm payrolls".

Why is this number so widely monitored?

1) The Federal Open Market Committee (the FOMC, affectionately referred to as "the Fed") has 2 mandates that it must focus on in determining the direction of monetary policy:

• Inflation
• Unemployment

Therefore, this represents the most recent data that the Fed will have for determining the direction of interest rates when it has its next meeting.

However, with each months new data come a whole host of revisions to the previous months' data (which can show some very large swings).

But traders ( with short-term views) will enter the market to trade based on what they think this data will represent for the future. This can cause an increase in trading volume on financial markets and an increase in volatility if they believe it might influence the Fed's decision.

Canada's Equivalent

At the same time (this month) Statistics Canada will report its latest data on Unemployment and Job Growth. 

http://www.statcan.gc.ca/daily-quotidien/141205/dq141205a-eng.htm

The Media will jump on this data and analyze it upside and down because, it can be market moving.

However over the last year this data has had some extremely wide swings and some reported errors and revisions that have eroded its credibility.

How Do We As Investors View This Data ?

We put into context with our long-term view of investing: that any market movement and volatility associated with this data is temporary and short-term in nature. It is data fraught with errors and revisions and should be monitored, but one month's data should not change our long-term perspective.

All data is important in helping us gage the state of the global economy. However, as portfolio managers our job is to be in front of these data releases, having a pro-active approach, rather than a re-active approach.

Our asset allocation decisions come with understanding of how the global economy is evolving and what the implications are for our clients portfolios over the next 5, 10 or 15 years depending on individual client goals and objectives.

It is all about having perspective and not over-reacting to any news or hype.