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/