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COVID & Unemployment

The seasonal adjustment to jobless claims has been … adjusted

Mitchell Hartman Sep 3, 2020
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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
COVID & Unemployment

The seasonal adjustment to jobless claims has been … adjusted

Mitchell Hartman Sep 3, 2020
Heard on:
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
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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

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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