Seasonality

And finance Allah Shmoop What is seasonally adjusted data or

S a D or sad Dr Elek Troy did That

guy builds a new weather control advice as part of

his evil plan for world domination He dumps fifty inches

of snow on Phoenix We're not sure how world domination

follows from a big snowstorm in Phoenix but well you

know we're sure Dr Elek Troy knows what he's doing

Dumping snow in the desert Well one kind of seasonal

adjustment Not really the one we're talking about here but

we'll get to that in a sec Captain Condor this

guy flies from his secret layer the superhero lair high

up in the Sierra Nevada mountains He captures Doctor Elec

Troy destroys the weather device and saves the day Cut

to you You're a researcher for the National Weather Service

You're locked in a basement of the Washington D C

Headquarters with no windows and no other people here surrounded

only by the blinking lights of whether measurement equipment You

don't have any cell phone reception or Internet access for

you All you know is that your equipment shows fifty

inches of snow in Phoenix You call your boss the

Phoenix is the snowiest place in the nation called the

press Get started on your game Changing academic paper on

climate change Well wait a minute The fifty inches of

snow doesn't indicate a really change in Phoenix is long

term snowfall It's just a one time event in this

case caused by a super villain you know as sometimes

happens art lesson here you can't always trust raw data

Numbers need contacts right The need for context leads us

to relying on seasonally adjusted numbers So yeah sometimes raw

data uncooked data It's very unhealthy to eat can be

misleading To counteract this fact while some economic information gets

reported on a seasonally adjusted basis that is the numbers

get massaged to take into account the natural impact of

the time of year For instance the unemployment rate well

This stat gets reported on a seasonally adjusted basis Every

year going into Christmas companies hire additional seasonal workers Package

delivery People need extra drivers Amazon and other retailers need

extra people to process orders Malls need elves to put

crying kids onto the lapse of Santa's suicide Hotlines need

extra people to take distress calls from you know family

dinners on an unadjusted basis the unemployment rate would always

decline Headed into the holiday season all these extra workers

would lead to lower unemployment data every year But eventually

Christmas comes and Christmas goes Everyone opens their presence and

while stuffs everything into closets for potential re gifting next

year Yeah Bob we're looking at you All the extra

holiday workers are back on unemployment at least until spring

when they can start lining up for summer gigs Yeah

another season like maybe they get jobs as lifeguards or

stand up comedians on cruise ships So going into the

holidays every year would see a drop in unemployment with

unjust ID data And then after the holidays there would

always be a rise in the unemployment rate Well if

the figure was reported this way it would be hard

to read much of the movement during this time of

year would be a result of seasonal factors The unadjusted

statistics wouldn't mean muchas well any kind of economic indicator

It would be hard to see what's really going on

in the actual economy from these numbers Aside from the

usual ticks up and down well is this year better

than last year How does this year's stack up historically

How's the labor market really doing Yeah it'd be hard

to tell Much of the data would represent seasonal noise

So the economist strip out the seasonal movements They make

guesses based on what's happened before About what the data

should do is a result of these seasonal factors They

then take the seasonal moves out and only report the

changes that don't have to do with seasonal workers Instead

the numbers tracked the underlying health of the labor market

like they're supposed to Well of course if you spend

your winters as a mall Santa you're springs dressed like

the Easter Bunny your summers as a snow cone sales

person and you're autumns as a Jack o lantern carver

wealth And you might never get counted in any seasonally 00:04:03.72 --> [endTime] adjusted numbers so you know good for you