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Economic News, Data and Analysis

Unemployment to 5.7 percent

The unemployment rate dropped to a seasonally adjusted rate of 5.7 percent in January. This seems to be good news (at least it’s not bad news) on the status of employment growth in the US.
However, it does look like this number is slightly misleading due to the seasonal adjustment process. See Delong’s report of Henwood’s explanation. The best interpretation is that employment situation is roughly unchanged from last month.
(Basically, the seasonal adjustment is meant to rid the data of regular effects that occur every year. This can be a good idea if we want to compare, say, January unemployment data with July unemployment data and interpret the result as a real shift in real economic activity. If we didn’t do this, a difference in the unemployment number would be a combination of real economic activity as well as some weather-caused change. For you statisticians out there, the CPS is now using X-12 ARIMA adjustment; an update from X-11 used since 1980.)

Employment Situation
Unemployment (Household Survey Data)
The unemployment rate fell to 5.7 percent in January; the number of unemployed persons was 8.3 million. The jobless rates for the major demographic groups were as follows: adult men (5.4 percent), adult women (4.7 percent), teenagers (16.8 percent), whites (5.1 percent), blacks or African Americans (10.3 percent), Asians (5.6 percent, not seasonally adjusted), and Hispanics or Latinos (7.8 percent). (See tables A-1, A-2, and A-3.)
Total Employment and the Labor Force (Household Survey Data)
Total employment in January was 137.5 million. The employment-population ratio–the proportion of the population age 16 and older with jobs–was 62.5 percent. The civilian labor force in January was 145.8 million and the labor force participation rate was 66.3 percent. (See table A-1.)


… more from the report on seasonal adjustment …

Seasonal adjustment
Over the course of a year, the size of the nation’s labor force and the
levels of employment and unemployment undergo sharp fluctuations due to
such seasonal events as changes in weather, reduced or expanded production,
harvests, major holidays, and the opening and closing of schools. The
effect of such seasonal variation can be very large; seasonal
fluctuations may account for as much as 95 percent of the month-to-month
changes in unemployment.
Because these seasonal events follow a more or less regular pattern each
year, their influence on statistical trends can be eliminated by adjusting
the statistics from month to month. These adjustments make nonseasonal
developments, such as declines in economic activity or increases in the
participation of women in the labor force, easier to spot. For example,
the large number of youth entering the labor force each June is likely to
obscure any other changes that have taken place relative to May, making it
difficult to determine if the level of economic activity has risen or
declined. However, because the effect of students finishing school in
previous years is known, the statistics for the current year can be
adjusted to allow for a comparable change. Insofar as the seasonal
adjustment is made correctly, the adjusted figure provides a more useful
tool with which to analyze changes in economic activity.
In both the household and establishment surveys, most seasonally adjusted
series are independently adjusted. However, the adjusted series for many
major estimates, such as total payroll employment, employment in most major
industry divisions, total employment, and unemployment are computed by
aggregating independently adjusted component series. For example, total
unemployment is derived by summing the adjusted series for four major age-
sex components; this differs from the unemployment estimate that would be
obtained by directly adjusting the total or by combining the duration,
reasons, or more detailed age categories.
The numerical factors used to make the seasonal adjustments are
recalculated twice a year. For the household survey, the factors are
calculated for the January-June period and again for the July-December
period. For the establishment survey, updated factors for seasonal
adjustment are calculated for the May-October period and introduced along
with new benchmarks, and again for the November-April period. In both
surveys, revisions to historical data are made once a year.

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Filed under: Data, Economics, Recession

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