Unemployment 2020

The seasonal adjustment to jobless claims has been … adjusted

Mitchell Hartman Sep 3, 2020
Heard on: Marketplace
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This week, the Bureau of Labor Statistics changed its methodology in adjusting for seasonal jobs, like that of a lifeguard. It makes the data more accurate, but also more confusing. Angela Weiss/AFP via Getty Images
Unemployment 2020

The seasonal adjustment to jobless claims has been … adjusted

Mitchell Hartman Sep 3, 2020
This week, the Bureau of Labor Statistics changed its methodology in adjusting for seasonal jobs, like that of a lifeguard. It makes the data more accurate, but also more confusing. Angela Weiss/AFP via Getty Images
HTML EMBED:
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This morning we had what seemed — at first — to be pretty darn good news. 

The Labor Department reported first-time unemployment claims, seasonally adjusted, were down by 130,000 last week to 881,000. That’s the lowest number of initial claims since the huge spike in layoffs started back in mid-March and is under a million for only the second time since then. 

For this week’s numbers, for the first time, the Labor Department adjusted its seasonal adjustment. That makes the data more accurate, but also more confusing.

First, what’s the point of a seasonal adjustment? 

“Economists use seasonal adjustments to smooth out seasonal patterns to get a better read of the underlying trends in the labor market,” said Heidi Shierholz, who was chief economist at the Labor Department during the Obama administration. 

“Every year in January, 100,000 extra people apply for unemployment insurance claims, because they lost temporary holiday jobs,” Shierholz said. “You wouldn’t want economists to say, ‘Ah, things in the economy are really deteriorating’ when they’re not, it was just a normal seasonal pattern.”

So the statisticians at the Labor Department apply seasonal adjustment formulas to reveal the underlying trends. 

But a pandemic with more than 20 million layoffs over a few weeks is pretty unprecedented. And the traditional methodology for seasonal adjustment of the data “has been messed up,” Shierholz said.

So the Bureau of Labor Statistics stepped up to fix the methodology. Joseph Brusuelas at RSM, a consulting company, explains: “They went from what we call the ‘multiplicative’ to an ‘additive’ seasonal adjustment — and I’ll stop there before I put everybody to sleep.” 

But BLS didn’t apply the fix retroactively to previous weeks. Meaning, we don’t really know if claims just fell by 130,000. It’s like comparing apples and oranges. 

Brusuelas said there’s a better number to follow right now: the total number of workers getting an unemployment check every week. That’s around 29 million, and it’s gradually been coming down. 

COVID-19 Economy FAQs

Are people still waiting for unemployment payments?

Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.

Are we going to see another wave of grocery store shortages?

Well, public health officials are warning that we could see a second wave of the virus before the end of the year. And this time retailers want to be prepared if there’s high demand for certain products. But they can’t rely totally on predictive modeling. People’s shopping habits have ebbed and flowed depending on the state of COVID-19 cases or lockdowns. So, grocers are going to have to trust their guts.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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