CME Group’s recent listing of futures and options on the monthly nonfarm payroll (NFP) release has sparked interest in forecasting this important economic statistic.

The way it works is that graphs are drawn and regressions run that match historical monthly changes in NFP with a list of other variables, in the hope of finding a stable relationship.

The main problem with this approach – and one that many traders may not be aware of – is that the historical data has been revised several times. The futures contract, in contrast, is based on the preliminary estimate for the most recent month and this estimate can differ markedly from the final, revised figure. Consequently, forecasting the NFP futures price needs to take into account the discrepancy associated with the preliminary figure.

How it works Near the start of every month, the US Department of Labor’s Bureau of Labor Statistics...