Reaction, Revision or Random? — March 2, 2026
Welcome to the Economic and Market Watch podcast for the week of March 2, 2026. This is Antony Davies.
Antony Davies:On February 20 at 10 a.m. eastern, the Supreme Court struck down President Trump's tariffs as unconstitutional. At that instant, the ten-year treasury yield was 4.08%. Fifteen minutes later, it had risen to 4.10%. Experts said that treasuries were reacting to the announcement, but how can a mere two hundredths of one percentage point movement mean anything?
Antony Davies:In its February revisions, the Bureau of Labor Statistics said that it had overestimated the number of jobs in the economy by over 860,000. This is the fifth largest revision since 1979. How can the BLS be so wrong?
Antony Davies:Most people would be unimpressed with a mere 2 basis point bump in the treasury yield, but concerned with an 860,000 overestimation in the jobs count.
Antony Davies:But both attitudes reveal an error that we picked up way back in elementary school. When we were first taught numbers, we counted things. One fish, two fish, three dogs, seven rings, 99 problems. The lessons drove home the idea that quantities are fixed, immutable things.
Antony Davies:In the real world, quantities are much more fluid. They aren't points on a line. They are vibrating strings.
Antony Davies:For example, what time do you wake up on a workday? If you answer something like 6 a.m., then you're thinking in number-line mode. You might set your alarm for six, but depending on how tired you are, whether the sun shines through your window, whether your power went out, how accurate your clock is, and many other factors, you won't get up at exactly six o'clock. You'll get up a little earlier or a little later, and even if you're off by just a few seconds, it's still not exactly six o'clock.
Antony Davies:The time you get up is not a point pegged at 6 a.m. on the number line. It is a plucked string that vibrates around 6 a.m. For more organized and punctual people, that string will vibrate less. For the less organized among us, it will vibrate more.
Antony Davies:A thoughtful listener might reply, "Certainly that's not true for all things. For example, 20 linemen work for my co op. That quantity is fixed."
Antony Davies:Except it isn't. If two are out sick, then 18 are working, not 20. If four of them each work ten hours of overtime, then effectively 21, not 20, are working.
Antony Davies:If one routinely takes long lunches, then some fraction between nineteen and twenty are working. In practice, the number of linemen, like most quantities in the real world, isn't fixed. It vibrates.
Antony Davies:When quantities vibrate, the noise they produce makes it difficult to distinguish between meaningful changes and random changes. That's where the eggheads like John, Sam and me come in.
Antony Davies:When we see a 2 basis point rise in the treasury yield or an 860,000 revision in the jobs numbers, we don't ask, "How big was that?" We ask, "How common was that?"
Antony Davies:Meaningful change happens occasionally, but random change is happening constantly. So the less common a change is, the more likely it is to be meaningful.
Antony Davies:That 2 basis point bump in the ten year treasury yield was a very small change, but it was also a very uncommon change. Over a fifteen-minute interval, changes of that size occur less than 1% of the time. In other words, there's a less than 1% chance that the bump was random noise. And that means that it's more likely that interest rates were reacting to the Supreme Court's announcement.
Antony Davies:The 860,000 revision in the jobs numbers was the fifth largest since 1979. However, large revisions like that are so common as to happen almost 20% of the time. In other words, there's a 20% chance that the jobs revision was simply random noise. And that means that it's less likely that there's something amiss at BLS.
Antony Davies:But, you might ask, "How can I know for certain whether something has meaning or is just random noise?" The answer is that you can't. Sometimes random things look meaningful -- like a cloud shaped like a dragon. And sometimes meaningful things look random -- like a QR code or encrypted text.
Antony Davies:So the next time you look at production charts or financials or employee records and you notice that something has changed, before looking for a problem to fix, ask how common the change is because it might simply be noise.
Antony Davies:This is Anthony Davies for the Economic and Market Watch podcast.
Antony Davies:Thank you for listening. Remember to download this week's Economic and Market Watch intelligence brief and dashboard, and send us email, because even eggheads need love. economicresearch@nrucfc.coop.
