About the “5-year low” initial unemployment claims

Yesterday, the Department of labor released its weekly first time unemployment claims.

While I am concentrating on my physical conditioning (if you have read my “About”  you understand how energy and time-consuming this can be,) it was obvious how bogus the numbers were.

According to the report, the seasonally adjusted data initial claims dropped to a 5-year low of 335,000. However the unadjusted number is 555,708 an increase of 2,360 from the previous week.

Maybe some of you are saying; “Wha Da HUH?”

Still others are probably using language  you would never hear me use (cough.)

First let us define the phrase seasonally adjusted, from Wikipedia:

Seasonal adjustment is a  method for removing the seasonal component of a time series that is used when analyzing non-seasonal trends. It is normal to report seasonally adjusted data for unemployment rates to reveal the underlying trends in labor markets.[1] Many economic phenomena have seasonal cycles, such as agricultural production and consumer consumption, e.g. greater consumption leading up to Christmas. It is necessary to adjust for this component in order to understand what underlying trends are in the economy and so official statistics are often adjusted to remove seasonal components.

This seems fairly straight forward, except there is not a standardized method to determine the seasonally adjusted number. As Wikipedia states:

When a seasonally varying dependent variable is regressed on a seasonally varying independent variable to find the effect of the latter on the former, the use of seasonally adjusted data can result in biased coefficients

All this leads me to this graphic by Newsbusters.

initial unemployment claims

Note the seasonal adjustment factor. It’s not the same. It’s higher, thereby  causing a lower unemployment claim. This is why as Wikipedia also states:

The seasonal components of a series are often considered to be uninteresting in their own right and to cause the interpretation of a series to be ambiguous. By removing the seasonal component, it is easier to focus on other components.

If they had used the same adjustment factor as last year, the claim number would have increased, not dropped. But as we know, the average person will only hear:

UNEMPLOYMENT CLAIMS AT 5-YEAR LOWS

Yea, I’m sick too.

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2 Responses to About the “5-year low” initial unemployment claims

  1. There’s a reason that the old saying, “Lies, damned lies, and statistics” has been around for so long.

  2. Pingback: Thursday March 7th; can't think of a witty title....

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