BLS Seasonal Adjustments Gone Haywire

I believe the seasonal adjustment is no longer valid given that anticipated job creation down the road has not and will not be happening. I expect late spring to reverse the January effect heading into the elections. If so, a perfect political storm is brewing because of their models!

"Irishscot2" compared the unadjusted numbers to the seasonally adjusted numbers on a percentage basis. I couldn't  tell much from the raw data he sent, so I asked for his spreadsheet and he graciously obliged.

It's difficult to visualize raw numbers, especially trends in percentage differences, so I added a column and a couple of graphs to the spreadsheet. Here are the results.

Seasonally Unadjusted Unemployment Versus Unadjusted Unemployment



The above chart shows how the Bureau of Labor Statistics (BLS) smooths the unemployment rate to account for seasonal trends. It also give a hint as to an increasing magnitude of that smoothing.

To highlight the month to month variances, I added a column to show the amplitude of the seasonal adjustments. The result is this chart.

Unadjusted Unemployment Minus Seasonally Adjusted Unemployment



Seasonal Adjustment Highlights
 

• There's always a big BLS adjustment in January.
  
  
• There's always a reversion to the mean that overshoots to the downside between March and April.
  
  
• There's always a secondary rebound back above the 0.0% line in July, followed by a smaller overshoot to the downside in October.

The problem is in the increasing amplitude of these swings, in both directions. It really makes you wonder just what the BLS is doing and why.

I have data charted all the way back to 1999. Prior to January 2009, the biggest January swing was .6 percent, in both 2004 and 2003. In 2008 the January swing was only .5 percent.

The amplitude of January swings in both 2009 and 2010 was .9 percent, way outside the data range for the last 10 years, by a factor of 50 percent (.3/.6).