Seasonally Adjusted Data
Categories: Metrics
Dr. Electroid builds a new weather control device. As part of his evil plan for world domination, he dumps 50 inches of snow on Phoenix. We’re not sure how world domination follows from a big snowstorm in Phoenix, but uh...we’re sure Dr. Electroid knows what he’s doing. Meanwhile, Captain Condor flies from his secret superhero lair high up in the Sierra Nevada mountains. He captures Dr. Electroid, 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 DC headquarters, with no windows and no other people, surrounded only by the blinking lights of weather measurement equipment. You don't have any cell phone reception or Internet access. All you know is that your equipment shows 50 inches of snow in Phoenix. You call your boss: “Phoenix is the snowiest place in the nation. Call the press! Get started on your game-changing academic paper on climate change!”
Uh, well...wait a minute. The 50 inches of snow doesn't indicate a real change in Phoenix's long-term snowfall. It's just a one-time event (in this case, caused by a supervillain). The lesson: you can't always trust raw data. Numbers need context. The need for context leads us to seasonally adjusted numbers. That is, the numbers get massaged to take into account the natural impact of the time of year.
For instance, the unemployment rate. 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 laps of Santas. Suicide hotlines need extra people to take distressed calls from 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. Every year. But eventually, Christmas comes and Christmas goes. Everyone opens their presents and stuffs everything into closets for potential regifting next year. All the extra holiday workers are back on unemployment...at least until spring, when they can start lining up for summer gigs. Maybe jobs as lifeguards and stand-up comics on cruise ships.
So going into the holidays, every year would see a drop in unemployment with unadjusted data. And then, after the holidays, there would always be a rise in the unemployment rate. 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 much as an economic indicator. It would be hard to see what's really going on in the actual economy, aside from the usual ticks up and down. Is this year better than last year? How does this year stack up historically? How's the labor market really doing? It would be hard to tell. Much of the data would represent seasonal noise.
So economists strip out the seasonal movements. They make guesses based on what’s happened before about what the data should do as a result of these seasonal factors. They then take these seasonal moves out, and only report the changes that don’t have to do with seasonal workers.
Theoretically, this seasonally adjusted data doesn't include the moves in unemployment that come from the holiday staffing. Instead, the numbers track the underlying health of the labor market…like they’re supposed to do. Of course, if you spend your winters as a mall Santa, your springs dressed like the Easter Bunny, your summers as a snow cone salesperson, and your autumns as a jack-o-lantern carver, you might never get counted in the seasonally adjusted numbers.
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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