Home › Forums › Financial Markets/Economics › January 2012 Employment Report: A Ruse? Please help me understand!
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poorgradstudent.
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February 5, 2012 at 11:37 PM #19486February 6, 2012 at 12:25 AM #737390
Arraya
Participant[quote=paramount]Thank you in advance. I am completely confused; were the employment numbers reported on Friday good or not?[/quote]
The answer is; Who cares if the markets liked them. As long as the “market” is happy and fed injections of cash from time to time everything should be A ok
February 6, 2012 at 6:22 AM #737394EconProf
ParticipantIn response to your basic question, the government has to inject seasonal adjustments into the report, otherwise the numbers would be meaningless. What’s important is not the absolute number of added workers or subtracted workers, but the change relative to an average of past years for that month. Only then can we discern an underlying improvement or decline.
It also happens for other data the government reports, such as retail sales. Say you are a store that typically does $120 million in sales per year. On average you do $8 million per month for eleven months, then $22 million in December, for the $120 total. If last December you did only $15 million, would you be happy because it is above your monthly average? Seasonally adjusted, that December would be considered an awful month, as it should be.
The tricky thing the government must do is adjust for many such seasonal influences that are often changing over the years, and it is often unfairly blamed unfairly for getting it wrong or making the change late. But they revise their methodology when warranted, and I’ve never seen conclusive proof they are tilting the numbers. Their assumptions and definitions are there for everyone to see and analyze, their footnotes and addendums explain everything, and attacks by the out-of-power political party, both Democrat and Republican, are routine.February 6, 2012 at 9:43 AM #737402poorgradstudent
Participant“Yeah, that really is a good report.”
http://www.ritholtz.com/blog/2012/02/taking-apart-the-january-2012-nfp-data/
If you are a bear, the only way you can spin the numbers is argue the trend won’t continue. Seasonally adjusted numbers allow apples-to-apples comparisons between months by factoring out noise that otherwise would make it look like happy times are here again every holiday season and the end of the world every January. It’s the same reason Rich posts both the raw numbers and seasonally adjusted data on this site.
Minimally, pretty much all the economic data coming out right now is good. Recoveries can falter, but overall things really are looking up.
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