NonSeasonally Adjusted Data?

In the comments of an earlier post, Roman asks "If you are going to not consider the birth/death adjustment, then its only fair to not count the seasonal adjustment. If you take that out, then the report shows a large gain of jobs. Why does no one here want to talk about that?"

Okay, its a question we might as well address (those of you with statistics or applied mathematics backgrounds please bear with us).

I criticize the B/D model because it has changed what was primarily a measured count (via tax withholding data at established firms) into something more theoretically based. Hence, what was once actual measurement is now primarily a form of modeling. We know that at this late stage of the economic cycle, the modeling creates these bizarre aberrations, such as +45,000 new construction jobs and +8,000 new financial activities jobs in April 2008.

Those data points aren’t merely wrong, they are patently absurd.

But what of seasonal adjustments? What they do is attempt to smooth out or reduce the effect of the regular seasonal patterns that tell us nothing about the economy, and everything about calendar effects: winter weather, school years, planting seasons, holidays, etc.

But since you asked . . .

Let’s do a month-to-month comparison of the non-seasonally adjusted data:

From the CES establishment data, table B-1,we learn that the 2008 numbers were 137,019 in March and in 137,722 in April, for a total nonseasonal adjusted change of +703k. Last year, in 2007, the March was 136,835 versus April 137,668, for nonseasonal adjusted change of +833,000.

So before seasonal adjustments, April 2008 created 130,000 less jobs than April 2007.

Here’s a graphic depiction of the year over year, non-seasonally adjusted NFP:


Chart courtesy of Brian Jacobs

For those of you wonky enough to care, here is the BLS’ explanation as to their Seasonal adjustments:

Over the course of a year, the size of the nation’s labor force and the levels of employment and unemployment undergo sharp fluctuations due to such seasonal events as changes in weather, reduced or expanded production, harvests, major holidays, and the opening and closing of schools.  The effect of such seasonal variation can  be  very large; seasonal fluctuations may account for as much as 95 percent of the month-to-month changes in unemployment.   (emphasis added)

That’s a rather substantial seasonal impact. What do you suppose we should do about it? 

Because these seasonal events follow a more or less regular pattern each year, their influence on statistical trends can be eliminated by adjusting the statistics from month to month. These adjustments make non-seasonal developments, such as declines in economic activity or increases in the participation of women in the labor force, easier to spot.  For example, the large number of youth entering the labor force each June is likely to obscure any other changes that have taken place relative to May, making it difficult to determine if the level of economic activity has risen or declined. However, because the effect of students finishing school in previous years is known, the statistics for the current year can be adjusted to allow for a comparable change. 

Insofar as the seasonal adjustment is made correctly, the adjusted figure provides a more useful tool with which to analyze changes in economic activity . . ."  (emphasis added)

Now you know . . .  Aren’t you glad you asked?




Table B-1  Employees on nonfarm payrolls by industry sector and selected industry detail 

Employees on nonfarm payrolls by industry sector and selected industry detail CURRENT
BLS, Table B-1.

Category: Data Analysis, Employment

Abelson Awards Pulitzer Prize for Fiction to BLS

Category: Data Analysis, Economy, Employment

WTF Headline of the Day: “Jobs Data Show Hopeful Sign”

Category: Economy, Employment

Martin Wolf on Housing Prices & Bailouts

Category: Podcast, Real Estate

Friday Night Jazz: Thelonious Monk

Thelonious_monk_with_john_coltraneOne of my all time favorites Jazz musicians is Thelonius Monk.

I stumbled across this video via a random click, and it reminded me just how much I have always loved Monk’s work, hence, another Friday Night Jazz featuring Monk.

Our man Monk was a three way genius: As a composer, as a jazz pianist, and as an improvisationist, he was without peer, and shaped the future of Jazz. Some notable discs:

Monks_dreamThelonious Monk with John Coltrane — what more can you add to these two geniuses riffing off of each other? Simply a monst    rous most own.

Monk’s Dream is a great example of Thelonious Monk in a Quartet format, with Monk at the peak of his career peak.

Monk’s Music a classsic compositions & recordings; Bold and inspired, with Coltrane, Blakey and Hawkins. Just fabulous.

Solo Monk a man, a piano, a studio tape recorder. Brilliant. 



Thelonious Monk Quartet with John Coltrane at Carnegie Hall accidentally discovered in an unmarked box by a Library of Congress engineer early 2005 (previously mentioned in our year end review). 




Videos after the jump . . . 


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Category: Digital Media, Friday Night Jazz, Music

Stimulus Check

Category: Economy, Taxes and Policy

NFP Minus Birth Death Adjustments

Category: Data Analysis, Employment, Technical Analysis

Job Loss Trend Dismal

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Bracing for NFP Day

Once more unto the breach, dear friends, once more: The monthly NonFarm Payroll report rolls out today, and the consensus is none too cheerful: Median estimates of 82 economists surveyed by Bloomberg for April 2008 is for a job loss of -75,000 (Dow Jones had -85,000). Estimates ranged from -150,000 to -18,000. None of the…Read More

Category: Data Analysis, Economy, Employment, Wages & Income