Thursday, December 30, 2004

"Seasonal adjustment" are two magic words in the world of economic data. Wave them once, twice, thrice, and you've got more than lipstick on a pig. You've got biscuits and sausage gravy with a side of bacon, and the only person wearing lipstick is the waitress filling your coffee mug.

With seasonal adjustment, today's US unemployment claims figures look delicious.
The number of new people signing up for unemployment benefits dropped last week, a hopeful sign that the recovery in the jobs market is moving ahead.

The Labor Department reported Thursday that new applications filed for jobless benefits declined by a seasonally adjusted 5,000 to 326,000 for the week ending Dec. 25. That left claims at their lowest level since the week ending Dec. 11.

The newest snapshot of the labor market was better than economists were anticipating. They were expecting claims to rise to around 335,000. . . .

Thursday's report also showed that the four-week moving average of claims, which smooths out week-to-week fluctuations, fell by 6,000 last week to 333,500, the lowest level since the week ending Nov. 20.
If you're interested in comparing December 2004 with July 2004, then "seasonal adjustment" is a necessary magical incantation. But if you're interested in something like the ability of the American consumer to keep shoving cheap imports into his gaping maw from month to month, then maybe we should do without the magic.

December and January are always terrible months for jobs, a fact that "seasonal adjustment" conjures away. The week ending December 25 saw first-time unemployment claims (NSA) rise to 453,654, up over 79,000 from the week before and over 83,000 from two weeks ago. The first two weeks of January 2005 will be downright brutal, as they always are. But we won't see this thanks to "seasonal adjustment".

With American consumers down to a 0.3% savings rate, how much more are they going to buy when 600,000 more of them a week are drawing unemployment benefits instead of wages and salaries? I suppose we should be expecting a negative savings rate in December or January?


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