Thursday, July 26, 2012

Jobless Claims Fall Sharply On Seasonal Adjustments

This morning, jobless claims fell by 35,000 after rising by 36,000 in the previous week.  The Boston Globe ( said this:  "benefits dropped by 35,000 last week, a figure that may have been distorted by seasonal factors".  The operative word in that statement is "distorted".  Then, the "Globe" went on to say: "Applications surged two weeks ago, reversing a big drop the previous week. But economists caution that the government struggles every July to account for temporary summer shutdowns in the auto industry."  In this case, the operative word is "struggles".

The problem with the government tinkering with the jobless claims number by using "seasonal" adjustments is that it is too open to tinkering for political reasons.  But, more importantly, in a day of widespread computerized data management, it seems impossible to believe that we are still having to estimate claims based on samplings and on seasonal adjustments.  Theoretically, there's no reason why the government couldn't have the actual numbers; on any day; and, in real time.  Why aren't all this nation's claims offices being locked into a single database?

The other problem I have is the concept of seasonal adjustments being singularly done for the auto industry.  These adjustments are probably not needed anymore.  They are hangovers from the days when the auto industry was the major employer in the country and at a time when almost every car sold was made here.  And, every year, the Big Three (Ford, General Motors, and Chrysler), for competitive reasons, would do a complete or major redesign of cars.  This, in turn, necessitated long shutdowns of the manufacturing facilities for retooling; every July.  The laid off employees would then apply for unemployment benefits. Also, today, many of our so-called American autos are made in places like Canada and Mexico.

Today, those major redesigns just don't occur with any regularity.  For example, the PT Cruiser, which was in production from 2001 to 2010, changed very little in all those years.  The Chevy Cruze and Volt, which share the same body style and frame, have not changed for the last three years.  Furthermore, automobile manufacturers are no longer following the tradition of introducing their "all new models" in the Fall of every year.  You can buy the "all new" 2013 Nissan Altima; right now. And, the Altimas are either made in Smyrna, Tenn. or in Canton, Miss. and I'm quite sure that the government didn't seasonally adjust when those plants were shut down for retooling; early this year.

The point that I'm trying to make is that these "seasonal adjustments" make no sense anymore; and, quite simply, they are as the Globe said: distortions. story:

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