Manufacturing Employment — Impact on Fed Rate Prediction Markets

How Manufacturing Employment Moves Fed Rate Prediction Markets

All Employees in Manufacturing — a proxy for goods-sector labor strength.

Manufacturing employment is a leading indicator of industrial health. Sustained contraction often precedes broader economic weakness and increased Fed dovishness.

The Bayesian Sensitivity Model

The model calibrates a sensitivity coefficient for each indicator: how many percentage points the cut probability at the next FOMC meeting moves per standard deviation of surprise. For Mfg Employment, the preliminary coefficient is ±+/- 2–4pp on cut probability. This means ifMfg Employment comes in 1 standard deviation above consensus (hawkish surprise), the model reduces cut probability by approximately +/- 2–4pp on cut probability.

These coefficients are preliminary until calibrated from at least 20 historical observations of Kalshi price reactions to each release. The calibration uses a regression of (surprise_zscore × sensitivity_coefficient) against observed Kalshi probability changes, cross-validated against CME FedWatch data going back to 2015.