Seasonally Adjusting Unemployment
Floyd Norris points us to one of the foibles of seasonal adjustments: How SA can make things look better or worse at various times of the year. He is referring to the Non-Farm Payrolls data from Friday. Comparing non seasonal apples to apples, the data was somewhat better than usual.
This is very similar to the recent data from the NAR regarding September existing home sales. That seasonally adjusted data made it look like things got much better in the month; It was more accurate to say that the traditional fall off in sales that month was not nearly as bad as usual.
With the NFP, the usual seasonal fall off also turned out to be not nearly as bad as is usual for October. I am not sure how much the stimulus is effecting the employment data, but my suspicion is that its impact is far less than the home buyer tax credit is effecting existing home sales.
Here’s Norris:
“The economic reactions over the weekend to Friday’s employment report all started from the assumption that things grew much worse in October. The unemployment rate leaped to 10.2 percent from 9.8 percent. Another 190,000 jobs vanished.
Actually, none of that happened.
In reality, the government report says unemployment rates remained steady at 9.5 percent. And the number of jobs actually rose, by 80,000. And the number of jobs for college-educated Americans rose more than in any month in the last six years . . .
For some reason, October is the month with the largest seasonal adjustment down in jobs. So the increase in the unemployment rate does not reflect people actually losing jobs. It reflects the belief that seasonal factors should have added more jobs than they did.”
The unadjusted numbers are actually constructive: they suggest that some hiring (College grads especially) is starting to improve. NSA jobs for college graduate jobs via the Household survey rose 755,000 in October — “the third-largest increase since the government started counting those figures, in 1992.”
Like the NAR data before it, the NFP data suggests that the usual drop off was less than expected. Combined, these two present somewhat encouraging signs . . .
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Previously:
Existing Home Sales FALL in September 2009 (October 23rd, 2009)
http://www.ritholtz.com/blog/2009/10/existing-home-sales-fall-in-september-09/
Source:
Did Unemployment Really Rise?
Floyd Norris
November 9, 2009, 12:41 pm
http://norris.blogs.nytimes.com/2009/11/09/did-unemployment-really-rise/
November 10th, 2009 at 10:40 am
seriously – what is the point of even trying to interpret these reports. last week the report was described by most as quite fugly, now its encouraging based on new interpretations.
November 10th, 2009 at 10:49 am
Calculated Risk has a slightly different take on this story:
http://www.calculatedriskblog.com/2009/11/employment-and-seasonal-adjustment.html
I think you may be onto something. But, I worry a little about the “end of history” argument (which I think is the subtext here) for using non-seasonally adjusted numbers… If it really is the end of history then no stats will be helpful.
November 10th, 2009 at 10:57 am
I loved the part about college educated vs high school educated unemployment rates. Two things.
1. Education matters, in spite of the tendency to glorify ignorance in our society.
and
2. It’s funny how a bill to give people handout-checks (unemployment insurance extensions) can pass Congress unanimously, but if we instead had a bill to pay those people the same amount of money to sweep streets or process paperwork for the government until they find private employment, it would be denounced as “socialism.”
November 10th, 2009 at 11:06 am
Is it just me, or when perusing the unemployment news has there been an uptick from large firms as far as mass layoffs are concerned? Sun, airlines, some banks, Nokia, etc…all of you have been reading the same things I have. It seems to me that this has just over the last 6 weeks or so started to make the news again…
B in T
November 10th, 2009 at 11:17 am
My company, a division of a Fortune 500 company (IT Services, privately owned), just gave layoff notices to 5% of the workforce.
My guess is the uptick you’re noticing has to do with budgeting for next year.
November 10th, 2009 at 11:24 am
http://finance.yahoo.com/news/Fed-officials-warn-weak-apf-3879922712.html?x=0&sec=topStories&pos=main&asset=&ccode=
Fed officials warn weak recovery won’t spur jobs
WASHINGTON (AP) — Unemployment likely will remain high for the next several years because the economic recovery won’t be strong enough to spur robust hiring, Federal Reserve officials warned Tuesday.
The cautionary note struck by the presidents of regional Fed banks in San Francisco and Atlanta were the first public remarks of Fed officials since the government reported last week that the nation’s jobless rate bolted to 10.2 percent in October. It marked only the second time in the post-World War II period that the rate surpassed 10 percent.
….This, in my own cynical little though process way, gave rise to this thought: Then didn’t you provide the stimulus for entirely the wrong people? And can’t you see how if you weren’t going to try to protect REAL jobs, and you admit that your stimulus program as it has been constructed won’t work for jobs, then do you have enough dunce hats and corners to sit in?
November 10th, 2009 at 11:28 am
By the way, CR, Roubini, other malcontents have opined repeatedly that this would be either a jobless or as the wags say, a job-less recovery for many, many months..now the Fed is finally recognizing that fact…
Rising equity markets in the face of prolonged severe joblessness….not a problem for our hero, Bernankeman….
November 10th, 2009 at 12:09 pm
A lack of jobs is one concern but hours worked is still the main concern for me. People are still being asked (ahem, told) to take unpaid time off and taking pay cuts. Sometimes the pay cuts come with a cut in working hours and sometimes not. Anyone out there have thoughts on whats going to happen when all of these newly minted lawyers/MBAs/PhDs that have been recently been deferred (but are still being paid) are finally released because there’s no work for them?
Its so simple, a revenue drop (wages) with increasing costs (taxes, fees, bills, mandatory insurance, students loans) will doom families throughout the country. Family budgets are just like the financials of companies: You can only create so much bottom line ‘growth.’ Real growth, long term growth comes from the top line.
November 10th, 2009 at 12:29 pm
For the past decade, it has seemed to me that the “Holiday Season” typically has the greatest number of pink slips versus any other time of the year. There is a Catch-22 going on in the economy – Businesses are cutting jobs and/or hours worked to improve their bottom line. However, the macro effect of many businesses cutting jobs and hours is that real revenue growth becomes impossible as the wealth of the consumer (derived from people with income) declines. Sure, businesses have the opportunity to tap into international markets but other nation don’t has the consumer driven culture that drove the American economy for decades.
November 10th, 2009 at 1:12 pm
Why worry about jobs? Just cut a few more employers like GM, GMAC, Chrysler, BAC, Citi, et al., a few more of Uncle Sugar’s checks, and employment will be fine. Of course, it helps in getting the subsidy if the employees whose wages are being subsidized are having a nice little slice of those wages gathered together and returned to the politicians that approved the subsidies.
Of course, it doesn’t help employees that don’t concentrate their power and resources thusly, which is why there will surely be more such arrangements in the future.
Soon enough, all economic decisions will be purely political.
November 10th, 2009 at 1:30 pm
[...] do. However, today I’m going to quibble with him (and, via proxy, Floyd Norris) over their interpretation of Non-seasonally adjusted Non-Farm Payroll data. If you hadn’t heard, the seasonally adjusted payroll data from the household survey [...]
November 10th, 2009 at 1:33 pm
The Feds are pumping money into the unproductive parts of the economy: autos, real estate, and banking. The assumption is that that “stimulates” the economy back to health. In reality, it’s a zero sum game. The subsidies pumped into unproductive industries is in essence stolen from actual productive parts of the economy, pushing the timeframe for recovery OUT. Right now, we’re just putting a fresh coat of paint on a house destroyed by an earthquake. Of course policymakers will never learn because we’ll just re-elect them again the next time around…
HCF
November 10th, 2009 at 1:41 pm
Bruce,
I too have been noticing more layoffs from some companies.
Sprint to layoff additional 2,500 by year end. http://www.reuters.com/article/bondsNews/idUSN0927685920091109
I heard that Sprint claims not to need as many workers on their customer support because their product is so good …..
November 10th, 2009 at 2:06 pm
This is decidedly a blue collar recession. Over the past 12 months unemployment increased only 1.6% for workers with a college degree, but it increased about 5% for all others. One could say that the impact of the recession on blue collar worker job losses has been three times greater than for college educated workers.
In October, the unemployment rate for college educated actually dropped 0.2% to 4.7%.
For other groups the unemployment rate ranges from 15.5% (no high school diploma) to 9.0% (some college or AA degree). Unemployment for these groups all increased from Sept. by 0.4% to 0.5%.
Do you suppose the college educated folks may be taking retail jobs that normally would go to others?
November 10th, 2009 at 5:59 pm
“Like the NAR data before it, the NFP data suggests that the usual drop off was less than expected.”
i’ve been gone a while but,…when did the NAR acquire street cred with you barry??
and yep, i do believe NFP numbers are also heavily “massaged”….
so many ways to count the uncounted….such a wide spread between u3/u6
November 11th, 2009 at 7:43 am
I believe the best way to approach this for those over 50 is focus on what it is you know and when done that much younger people did not have a chance to do yet, due to lower number of years employed.
But when all else fails, it makes sense to at least spend more time to manage your retirement accounts, and make up for the lost income, while you are waiting for the next job interview.
Yes, stocks have become much more expensive,and may consolidate a bit from where they are now.
However, using a good market timing system can help an investor profit both from the upside and downside of this market.
Consider http://invetrics.com
Its daily DJIA index trading signal is up a respectable 68% for the year (as of November 1, 2009) and it is free of charge for individual investors.