Art Cashin Takes On Critics Of His Seasonal Adjustment Seasoning
We have covered the topic of BLS seasonal adjustment to death and beyond, as well as the endless expansion of those dropping out like flies from the labor pool (did those not in the US labor force, one way or another, whether due to mistracking, statistical aberrations, or outright data manipulation, increase by 1.2 million in January? It did? Next question... or does the government now desperately need an apologist for its own upwardly biased data 'mismanagement'?). Yet some of the formerly relevant elements at the less than cutting edge of asset management-cum-blogging decided to call out Art Cashin for daring to point out just this glaringly obvious seasonal adjustment issue. Of course, Art does not need us rushing to his defense. He can do a good enough job on his own.
From UBS Financial Services
Seasoning The Seasonal Adjustment - My comments about the non-seasonally adjusted (USA) 1.8 drop in payrolls in 2012 brought in lots of reaction from some friends and, in particular, some from my most recent dinner. Basically, they all wondered if I had lost track of the importance of seasonal adjustments.
They reminded that during the yearend holidays millions of people are hired as everything from sales clerks to Santas. And, when the tinsel comes off the tree, are they not laid off? Some reminded that over the last 10 or 20 years, the first two months of every year have seen similar, or even larger, drops in NSA payrolls. Duh! Yes, I know.
My point - poorly made, I guess, was twofold. First, that as Lakshman Achuthan asserted, the severity of the great recession may have produced such severe numbers that they may have distorted the adjustments in the last few years. Secondly, I wanted to suggest that we may have a bit of an economic La Cage Aux Folles - what we think we see is not what we are actually looking at.
As the first quarter has progressed, the headline data has offered hope. Payrolls were said to rise over 200,000 in both January and February. Each week Initial Claims have steadily improved. But all of the cheer is in the adjustments. Those 1.8 million laid off Santas probably filed for unemployment but were adjusted away.
Seasonality is important, logical and necessary for perspective. But, sometimes the real world can look a little different. We won’t know if the image was distorted until months from now. It may be too early in the season for rose colored glasses. They’re more a summer thing - right?