Financial markets
Buttonwood's notebook
Economic data
Too much seasoning
Feb 8th 2011, 15:03 by Buttonwood
THE markets eventually decided that the fall in the US unemployment rate announced last Friday was more significant than the disappointing headline increase in payrolls. But John Williams of Shadow Statistics sheds some disturbing light on the data. Mr Williams has made his name by trying to see beyond changes in the methodology of compiling the data - maintaining a Clinton-era measure of inflation, for example, which is much higher than the official number.
Mr Williams points out that
the severe decline in economic activity has overwhelmed traditional patterns of seasonal activity, destabilising the calculation of seasonal-adjustment factors using the traditional mathematical models that are based on a number of years of activity, with the greatest weighting given to the most recent period's patterns.
This is particularly true of employment. While the headline seasonally-adjusted rate fell from 9.4% to 9% in January, it rose on an unadjusted basis from 9.1% to 9.8%. Similarly, the broader rate (which includes discouraged workers) fell from 16.7% to 16.1% on a seasonally-adjusted basis, but rose from 16.6% to 17.3% on an unadjusted basis. Clearly, since seasonal adjustments net out to zero over the year, one would expect a jump in the adjusted rate in some future month. Far from recovery, Mr Williams is talking of an intensifying double-dip recession.
About Buttonwood's notebook
In this blog, our Buttonwood columnist grapples with the ever-changing financial markets and the motley crew who earn their living by attempting to master them.
Advertisement
Economist blogs
- Americas view
- Asia view
- Babbage
- Bagehot's notebook
- Banyan
- Baobab
- Blighty
- Buttonwood's notebook
- Charlemagne's notebook
- Clausewitz
- Daily chart
- Democracy in America
- Eastern approaches
- Free exchange
- Global Leadership
- Gulliver
- Johnson
- Leviathan
- Lexington's notebook
- Multimedia
- Newsbook
- Prospero
- Schumpeter's notebook
- The World in 2011: Cassandra
Most commented
- Charlemagne: No time for doubters
- Banyan: Taiwan's commonsense consensus
- China's pre-emptive crackdown: The people doth not protest
- Turkey and Europe: Mr Erdoğan goes to Germany
- China's foreign policy: Setting sail for Libya
- Language and opinion: Framing climate change
- Precautions in Xinjiang: Catching a whiff of jasmine in Kashgar
- Qaddafi and his ilk: Blood and oil
- Turkey's election: A Muslim democracy in action
- French politics: The first European casualty of the Arab uprisings
Over the past five days
Most recommended
- Qaddafi and his ilk: Blood and oil
- China's pre-emptive crackdown: The people doth not protest
- KAL's cartoon
- Banyan: Taiwan's commonsense consensus
- A special report on feeding the world: The 9 billion-people question
- The Arab uprisings: Endgame in Tripoli
- Energy prices: Tax away vulnerability
- China's foreign policy: Setting sail for Libya
- Labour law in America: Showdown in Madison
- Venezuela's economy: Oil leak
Over the past seven days
Advertisement
Subscribe to The Economist's free e-mail newsletters and alerts.
Subscribe to The Economist's latest article postings on Twitter
See a selection of The Economist's articles, events, topical videos and debates on Facebook.
Advertisement
Readers' comments
The Economist welcomes your views. Please stay on topic and be respectful of other readers. Review our comments policy.
Sort:
Nothing new here.
I pointed this out on Friday.
http://www.economist.com/comment/821915#comment-821915
Regards
I can share a ray of hope that I've been watching for. Yesterday I saw the first "Help Wanted" sign in a window since this latest unpleasantness began.
bamps, let us hope then that a former engineer can begin making minimum wage with no benefits at your local store.
Progress!
1. From looking at the January 2008 employment report, it appears that the comparative seasonal adjustment for January vs. December is, overall, not dramatically different from what it was 3 years ago. For household survey employment, there is a somewhat larger adjustment for January (which adds 1,724,000 vs. only 1,641,000 in 2008), but it is more than compensated by the December adjustment (which now adds 47,000 instead of subtracting 123,000), so that the 2011 report actually adds 87,000 fewer employees to the December-to-January difference than the 2008 report did. Thus, if anything, the effect of the recession had been to make the seasonal adjustment of December-to-January employment growth more conservative, and if anything, we should expect less reversal later in the year than we have in previous years.
2. In any case, the raw December and January numbers are not comparable, because the population controls have changed. Look at Table C, where it shows the impact of the change in population controls. Without the change, seasonally adjusted household survey employment would have risen by 589,000. That's a huge number.
3. Seasonal adjustment adds about 1,700,000 to (household survey) employment growth between December and January (give or take about 50,000). Let's say "normal" monthly employment growth is about 200,000. That means that, normally, we lose about 1,500,000 in employment between December and January. This time, adjusted for the effect of the population controls, seasonally adjusted employment rose by about 600,000. In other words, instead of losing the usual 1,500,000 (give or take 50,000), we only lost 1,100,000 (give or take 50,000). That is a huge difference.
4. Bottom line: even taking into account seasonal adjustment issues, this was a strong report.
The hoopla about 9% belongs in Wizard.... Please forward this article to all the world's great analysts.
Like I've said other places, this seasons spending is due to thrift burn-out and higher non-discretionary expenditures cutting into saving. Savings will need to be made up for later.