About That August Seasonal Adjustment

One of the justifications for today's poor payrolls report is that calendar effects and seasonal adjustments (which oddly are never mentioned when the jobs report is stellar) had an undue influence. And, to an extent, that is true: as the chart below shows, August (and September) have traditionally been the weakest payrolls month over the past two decades.

Conveniently, there is a simple way to normalize for seasonal adjustments: look at unadjusted data.

Unfortunately, here we get another confirmation that the economy is rapidly slowing down, because when looking at the unadjusted payrolls for August, and specifically the year-over-year increase which eliminates all intra-year seasonal noise, we find a 16% drop in the number of annual jobs added, which in August amounted to 2,100K, versus 2,502K as of August 2016 and 2.814K in 2015 when the series peaked.

In context, this was the biggest annual drop on a percentage basis for unadjusted job creation since the financial crisis. Perhaps instead of hiking, the Fed should take a long hard look at that QE4 button: after all, stocks already have...