Do Seasonal Adjustments Distort Job Numbers?

Last Friday, the Bureau of Labor Statistics reported that the U.S. gained 163,000 new jobs on a seasonally adjusted basis. But the nonadjusted numbers tell a very different story. Nonfarm employment in the U.S. lost more than 1.2 million jobs in July when compared to June.

When we get data on housing or auto sales or jobs, the headline number is nearly always adjusted for seasonal variation. With jobs, for example, the number of jobs lost in January always plummets due to layoffs following the holiday season. The other dip, in July, comes from the flood of education jobs that are “lost” until school starts again in the fall. This chart, from the Calculated Risk blog, shows the effect quite clearly.

A blog post at the Washington Post notes that some economists think that the seasonal adjustment calculations need to be retooled to account for the effects of the financial crisis and recession. Is the U.S. economy really on a jobs roller coaster or does the seasonal adjustment calculation just make things look weird?

Overall, the U.S. economy has been adding an average of 152,000 jobs per month for the past year and a half. How to increase that number is what this year’s elections will come down to.

Paul Ausick