Seasonally Adjusted Data: Does it Help?
Last Friday (August 6,2021) the Bureau of Labor Statistics (BLS) released their preliminary jobs data for July and it was a doozy. The BLS reported that 943,000 jobs were added to the economy in July. 2021.
Sounds pretty impressive right? Too good to be true? Well, it really is too good to be true. Worse, it’s a lie.
Work in The Real Economy
In the real world where people get up and go to work and get a check for their labors is not seasonally adjusted. Fortunately, the BLS also shares that data(but no one else seems to notice it). Without the seasonal adjustments, the economy lost 133,000 jobs in July.
Let me repeat that: There were 133,000 fewer jobs earning pay in July than in June.
Trying to think of what other aspects of our lives have seasonal adjustments I simply could not come up with any. We have seen that gasoline prices tend to rise in the summer and fall towards winter, but I’ve yet to hear any seasonal adjustments applied to the gas price to make these changes seem more palatable for us.
How Much Is This Seasonal Adjustment?
|Non-Farm Payroll For July|
Million Plus Jobs Added Every July
As you can see in the table above, the BLS adds more than 1 million jobs every July. The jobs must be taken away during other months when we actually have created jobs. Does this lead to better decisions made by those that use this data? It’s hard for me to see how that is possible when the whole objective is meant to gauge the health of the US economy.
In our situation for July, we would have to lose more than 1 million jobs in July to even get close to showing no job growth. I find that simply stunning. Even in a terribly July, we’d still find solace that we were still adding jobs to the economy with the Seasonally Adjusted NFP (although we’d be lying to ourselves).
Using Unadjusted Numbers Paints a Different Picture
Would you have a different picture of the economy if we used the real data? Let’s look at this potential headline if we used the real data:
“July NFP Loses 133,000 Jobs Despite Low Interest Rates and States Re-Opening”
I think it speaks for itself. Don’t you? Somewhere, George Orwell is smiling knowing that he was right.