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Seasonal Factors and Job Growth

Friday, 07 February 2014 10:41

Many people who should know better have been placing far too much emphasis on the weather as an explanation for weak economic data. Cold weather and snow do slow economic activity as people don't like to go shopping or to restaurants in sub-zero weather or blizzards. But cold weather and snow are normal parts of a winter in the Northeast-Midwest. This means their impact is already included in the seasonal adjustment factors for December and January.

The weather will only have an impact on the data if this winter is notably worse than recent winters. I'm not a meteorologist, but that doesn't seem so obviously the case to me. In other words, it's not clear that the weather has had much impact on the data we have been seeing. 

I'll also add that it's hard to understand the claim from Ian Shepardson that with last year's seasonal adjustment factors (these change slightly year to year), we would have seen 265,000 jobs rather than the 113,000 reported by the Bureau of Labor Statistics (BLS). In the unadjusted data BLS showed a loss of 2,870,000 this year from December to January compared to a loss of 2,864,000 last year. Last January's seasonally adjusted jobs number was 197,000.

Given the difference in the unadjusted numbers, at first glance that would look like we would have seasonally adjusted growth of 191,000 using last year's factors. The actual number will not be simply additive because of differences in seasonal factors across sectors. Still is it hard to believe these differences would get us another 74,000 jobs. 

Of course what seasonal factors give, they also take away. (On average, seasonal adjustments have to be zero.) In the seasonally adjusted data we created 149,000 fewer jobs in December of 2013 than in December of 2012. In the unadjusted data the difference was 194,000. If we want to say that we have the wrong seasonal factors so we should be happier about the January numbers, then we would have be more unhappy about weak December numbers.

Comments (9)Add Comment
All the neocons that fit it prints
written by John Q, February 07, 2014 10:15
article not only obfuscates the $6 billion cost of unemployment benefits (0.17% of the federal budget), it follows the Times's recent inclination to quote exclusively from far-right sources.

Here we have Senators Harry Reid (R-NV) and Orrin Hatch (R-UT), and Representatives James Lankford (R-OK) and John Boehner (R-OH) -- three empty staters and the Speaker of what many consider to be the most irresponsible House in history.

While many of her editorials remain admirable, it appears that in her news coverage the Gray Lady has become a whore.
written by John Q, February 07, 2014 10:47
I meant the preceding comment for the previous posting, "Extending Unemployment Benefits Would Increase Spending by 0.17 Percent" Sorry.
Midterm Elections
written by Tyler, February 07, 2014 11:16
The weak economy guarantees the Democrats are going to get crushed in this year's midterm elections. Now, even Krugman opposes fiscal stimulus. He says the deficit growth would "tilt the balance toward cuts in the safety net the next time the deficit becomes a big issue." That is the epitome of loser liberalism.
Seems like we elected President Fred Hiatt
written by ifthethunderdontgetya™³²®©, February 07, 2014 12:08
back in 2008.
November is still a long ways away ...
written by Squeezed Turnip, February 07, 2014 10:53
I don't expect an economic turnaround (esp. given Boehner's two-facedness), but 10 months is a long time in politics land. And remember, for example, that BO didn't get canned over a lackluster economy.
written by urban legend, February 07, 2014 11:18
Maybe so, but the midwest and south haven't seen a winter like this (from mid-December through now) for many, many years -- probably not since 1979 (and I don't know how bad the south had it that year. We have a 10-foot pile-up of plowed snow where our driveway hits the street. Cabin fever in Chicago is at epidemic proportions, greater than I've ever seen in almost half a century.

So maybe the weather-blamers are the ones who know better.
This winter is abnormal for the current and previous decade
written by Shawn Wilkinson, February 08, 2014 9:53
But when we go back through time, this winter is fairly normal. Also, snowstorms and icestorms like this were more common in the midwest/northeast on a decade by decade basis. The frequency tapered off in the late 90s and early 2000s, and then it basically stopped. Due to the infrequency of experiencing "terrible weather", we think it is abnormal, though technically the infrequency of these winter events is the abnormality, not the occurrence of these events.

Economists should be able to see this in the changes to the factors weighted to consider seasonal fluctuations. Climate scientists see this in the collected climate data.

The South used to get bad winter storms every decade. When the winter events started to slow up north, these winter events completely disappeared in the south. Hence many think it's an abnormality, despite even myself remembering bundling up on various cold mornings (~30-40) when I was a kid in Louisiana.

I chalk this up to global warming. The same reason we are experiencing infrequent (and bit more powerful) winter storms is the same reason Australia is suffering through multi-year droughts and ridiculous heat waves.
Oh say can you see us?
written by Mark Paul, February 08, 2014 12:13
The United States is a big country. It's so big, in fact, that it doesn't have a single national "weather." In fact, because of the size of the country relative to the movements of the jet stream and the size of atmospheric highs and lows, it can't have a national weather. This year, while it has been cold and snowy in the villages where the self-referential media elite live, it has been exceedingly dry and warm here in the western half of the country. If the weather has cost the East some construction days and retail sales, it has remitted them to the West. In other years, the opposite is often true. I'm with Dean here. Trust the seasonal adjustments, not the eyes, especially of reporters who can't even see us out here under the sun.
written by urban legend, February 08, 2014 3:58
What's the population of the sunny and warm western half of the country vs the snowed-in (and colded-in) eastern half? generalities here are not very helpful. Has this been an unusually weather-affected season or hasn't it?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.