While perusing various articles on the Employment Situation Summary that was released yesterday (2/3/2012), I came across this transcript from the Rush Limbaugh radio show where Rush decides essentially that we shouldn’t bother with the seasonally adjusted numbers and only look at the raw (NSA) job creation number from the Establishment Survey (likely because this number is negative and thus “bad” for Obama). What Rush says is:

“That’s part of this two and half million fewer jobs. Are you hearing me on this, folks? It is corrupt as it can be. Well, now, the wait a minute, though. There’s nothing new here in the seasonal adjustment. Normally we never talk raw numbers. Nobody ever reports or talks about raw numbers. I happened to see today the raw numbers, and little red flags are going up, my curiosity is being piqued here. And then I see that the labor force participation rate, 1.2 million people dropped out of the labor force in one month, and it happens to be December to January.”

What exactly are are these “red flags” Rush? These is a very good reason we have seasonal adjustments and more importantly, there is very good data on just how big the January adjustments typically are. What follows is is the “raw data” for January job reports going back to 1983 (the first year of the recovery from the 81 recession to pick an arbitrary date):

1983-01-01 -1667
1984-01-01 -1490
1985-01-01 -1744
1986-01-01 -1960
1987-01-01 -1966
1988-01-01 -2092
1989-01-01 -1979
1990-01-01 -2094
1991-01-01 -2550
1992-01-01 -2388
1993-01-01 -2167
1994-01-01 -2250
1995-01-01 -2309
1996-01-01 -2700
1997-01-01 -2546
1998-01-01 -2559
1999-01-01 -2755
2000-01-01 -2639
2001-01-01 -2876
2002-01-01 -2889
2003-01-01 -2685
2004-01-01 -2661
2005-01-01 -2706
2006-01-01 -2653
2007-01-01 -2794
2008-01-01 -3035
2009-01-01 -3698
2010-01-01 -2869
2011-01-01 -2858
2012-01-01 -2689

Notice a pattern here Rush? You see, every January many people get laid off regardless of underlying economic conditions. It is a very predictable and very consistent pattern (not one year with fewer than 1.49 million job losses), hence the seasonal adjustment. The BLS adjusts most months (although some adjustments are larger than others). For instance, last year, the “raw numbers” for February were +821,000 jobs, for March were +913,000 jobs, and April were +1,179,000 jobs, but obviously the seasonal adjustments took those numbers down considerably. So Rush, I am going to issue a challenge to you. I am going to challenge you to quote only the “raw numbers” for job creation every month this year, right up to the election, since you don’t trust the seasonal adjustments. I am going to take a guess and say that you won’t take me up on the challenge and instead will likely just pick and choose which number to use based on what is worse for Obama, but maybe there is a hint of journalistic integrity somewhere in your body.

Also Rush, since you decided to quote Zero Hedge regarding the “1.2 million people that dropped out of the labor force in January” (you do realize that Tyler Durden isn’t a real person right?), I have decided to correct you on that point as well since I am already writing to you. That 1.2 million increase in those not in the labor force is an adjustment that the BLS applied based on actual data from the 2010 census. Essentially, since the census provides more exact numbers on the population statistics every 10 years, the BLS adjusts their estimates that were made in the intervening period (ie 2001-2010), but since the census doesn’t break down monthly changes, the BLS simply applies the adjustment in one month (ie this January), which they clearly pointed out in the report. Conveniently, the BLS also provided a very nice table that showed what the December 2011-January 2012 change in the adjusted categories would have been without the once a decade adjustment. The actual change (without the revisions) from December to January in those “not in the labor force” was only -75,000. I wrote a post on this yesterday to correct both Zero Hedge and Rick Santelli, who made the same reading comprehension mistake that you succumbed to. And in case you just don’t want my word on it, you can go to Calculated Risk for another take on it.

I hope this brief summation helped you understand a little bit more about the seasonal adjustment and the once a decade census adjustment, but if not, feel free to contact me, I’d be happy to have more discourse with you on the subject.


SilverOz is an MPA specializing in local economic development and have worked in local economic development for a mid-sized midwestern county for over 10 years.  He has personally worked on/managed projects that have totaled over $500 million in direct investment into the county.

Category: Data Analysis, Real Estate, Really, really bad calls, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “To Rush Limbaugh: A Lesson On The Seasonal Adjustment”

  1. Frilton Miedman says:

    I stopped listening to Rush when he had a TV show in the early 90′s, after hearing him whine day after day about how Clinton was ruining the economy I just got sick of him.

    At the time, I had no reason to doubt Clinton might ruin the economy, I was just sick of listening to Rush whine.

    Turns out Clinton presided over one of the greatest bull market/economic booms in American history.

    What now has me absolutely dumbfounded is how that fat pig “earn” $50 mil a year??…Who listens to him?

  2. blackjaquekerouac says:

    fine…”we’re in a recovery” and it’s “blah, blah, blah” time. No one is arguing with you. There is no “right wing conspriracy” here. I would have started…and repeated…with “bond yields” however and posed it as a question…as we all have something to learn by that do we not? (and of course the answer is yes.) No one get’s 5 minutes in a bank on Wall Street without understanding and predicting bond yields. Of course this should go without saying since all the banks…as much as they finally seem to be crawling out of the last Fed created “total annhilation” …are still at a loss for…is it words?

  3. CitizenWhy says:

    Ha ha, you’re not assuming that Rush wants to be factual, fair, and objective, are you? Please!

  4. mathdock says:

    Silver, it’s not difficult to take out seasonal adjustment from the figures, though it’s a bit “inside baseball”: use the trailing 12-months unadjusted running sum. Then January 2012′s estimate (unadjusted) replaces January 2011′s (unadjusted), and the change in the running sum is what one can report for that month. As a second value, use the 12-month “revised” running sum , though it runs behing the snapshot number by a month. The revisions include a larger sample of businesses, and so are improved estimates.

    Further, the NFP “number” is usually too small to be statistically significant. The BLS estimate that is published also comes with a 90% confidence interval (which NO ONE addresses); most times, the value “zero” is in that confidence interval, which says that any one month’s information is usually not statistically significant at the 90% confidence level, or with alpha = 0.1. Why? Their sample size is too small to get a reasonably tight estimate for the true NFP number. However, that sample size is driven by time constraints imposed by the deadline for the initial snapshot. Their revised number the following month contains a larger sample of businesses.

    ZH pointed out in an article not too long ago the bias in the birth-death model over many years appears to often, but not always, overstate the true value, which IRS data resolves annually. Sometimes the revision, normally downward, is reasonably small, and sometimes it exceeds 500,000 j0bs in a year. Never makes the headlines, though.

    Finally, The year-over-year change is less subject to distortions than the month-over-month change, because seasonality has its own range of uncertainty which averages out over the year. The Housing and building numbers always compare year-to-year, and so should hiring.

    I don’t know if you’ve noticed, but Monster’s guesstimates haven’t been so far off lately. That’s a sign of a stabilizing rate of change in employment, and perhaps refinements in their own techniques. Rush’s basic statement is indeed naive, but one can provide meaningful, unadjusted data . One other benefit: The 12-month running sum gives a more global view of the nation’s NFP changes.

    FM, Rush has addressed his lifelong battle with food. He’s now merely a 60-year-old man who is of average height and weight, and he is above all a supreme entertainer whose Arbitron numbers are the envy of every other radio talk show host. He’s clearly not your cup of tea, but he’s no less a showman than the politicians who want your money to put their benificence on public display. On his good days, he has more meat to his ideas than those he holds up to public examination. On his bad days, he’s gotten stale. Not bad for nearly 30 years of hard work at the center of political discourse. I expect he’ll retire in a couple of years, once he realizes he isn’t working as hard as he used to and that he can’t any more. OTOH, how few stars leave at the right time?

  5. ComradeAnon says:

    Now, now. It was probably on a Friday, right before a trip to a tropical sex capital and he had to hurry and get his boehner pill prescription filled.

  6. theexpertisin says:

    There will be plenty of intense remarks about Limbaugh here. Can you feel the love?

    Lighten up.

    The man is an entertainer with millions of fans. Like Stewart, Colbert, Olberman, Maddow, Schultz, et al., Limbaugh plays to his audience. The fact that his politics are different than yours or mine, more or less, should not diminish his place in the realm of long term successful entertainment personalities. On the positive side, his charity work which has raised millions for the families of military vets is commendable.

    And unlike others mentioned above, my observation is that he never gets a media pass for inaccuracies and other assorted folly.

  7. SilverOz says:

    @mathdock. Using the household survey, we know that the margin of error is +/- 436,000 jobs, so January’s gain of over 600,000 is significant. We also know that a change in the unemployment rate has to be at least .2% to be significant, so again this month was significant (those significances come from the CPS methodology on the BLS website). As for the establishment survey, I agree that one month is typically statistically meaningless, but the seasonal adjustments are very well tested and defended by years of data. Proclaiming, as Rush did, that somehow we should be worried because the “raw data” showed a big loss in January is simply a showcase of ignorance. As for the year over year change, the NSA number for the Establishment survey was roughly 2 million jobs and for the household survey 2.3 million jobs.

  8. olddogDALTX says:

    In November those who feel that the economy is great, their net worth recovered, their jobs secure, and earnings high enough to recover any hiatus in salary will be grateful to this Administration. Those outside this group will not be so happy with the Administration’s performance. Either way, talk is cheap. Clinton took out Bush even though, those that knew were claiming the recession long over. It will be interesting.

  9. jd351 says:

    @ mathdock

    Food for thought:Rush Limbaugh’s Ratings Have Fallen 30% In The Last Six Months

    Read more: http://www.businessinsider.com/rush-limbaugh-hannity-imus-radio-ratings-2011-5#ixzz1lTIHyCx6
    might want to brush up on the your facts

  10. mathdock says:

    SilverOz: Agreed, I liked this month’s numbers also as they are outside the typical 90% confidence interval. No quibble with that. And jd351, I’m not surprised by the decline in Arbitron ratings. I wasn’t asserting so much that his numbers today are at any particular level because I hadn’t seen recent info. I’ll certainly review your link to see where they all stand; rather, the point I was making was that the length of time he held a large margin of listenership was indeed the envy of other talk-show hosts. Your link would suggest his retirement may indeed be just a couple years off, and may be sooner than that; say, early 2013, after the next round of elections.

    Regards to you both.

  11. DeDude says:

    When numbers come out that are clearly good and a boost to the Democratic Presidents re-election chances it is not unexpected that the right wing spinsters will try to take over the headlines with something negative. It is their job, and the expectations of the people who listen to them. Those listeners need something to throw at those other people who at lunch break raise the issue that employment has improved. Normally they can take out a little subset of the data, and say: “no its actually not good, look at this nugget; it is actually bad”. Problem is that this time around there were not really any of the pieces that were bad – so the right wing spin machine was in a bit of a panic. How to deliver to their minions that little nugget that would allow them to claim that “no its not good, its bad”. So they made fools out of themselves in their desperate attempt to turn good into bad.

    Fact is that things have turned and are going in the right direction, although way to slow and with specific subgroups of people still suffering way too much. The rest of this election season we will be treated to lots of entertainment as the right wing desperately try to turn “good” and “improving” into “bad” and “deteriorating” – facts be damned.

  12. [...] several (usually conservative) commentators (e.g., [0]) have raised questions about the BLS methodologies, I thought it of interest to look at how [...]