Sunday, October 9, 2011

Watch the trend, not just the latest data point

Some excellent thinking from Barry Ritholtz in his recent post NFP Report: Trend vs Single Data Point discussing on how best to interpret the latest job numbers.   

The key ideas I take away from this are to 1) watch the trend, 2) ask the right questions to establish context, 3) examine a wider range of metrics (not just the headline numbers),  and especially 4) not to over focus on the latest data point. 

Related to some of our recent posts, one of the things that makes following Barry's advise more difficult these days is the way that the standard reporting modes for key metrics almost universally use Month-over-Month, and/or or Year-over-Year figures.   Other ways of reporting the data can (such as net change over 2 years or 5 years) can reveal details that would otherwise remain hidden.  

Playing with the data, keeping context in mind, and looking for the trends and the answers to our deepest questions is the best path to more complete understanding and improved decision making. 

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