On March 5th, the U.S. Bureau of Labor Statistics (BLS) reported that the unemployment rate held steady at 9.7%. At the same time, the BLS reported that 36,000 jobs were lost. If you take into account that the Census hired 15,000 people, then the jobs lost would have been 51,000. The reason that the employment rate held steady while job losses continued is that the Current Employment Statistics (CES) is where the jobs number comes from. This is a survey of approximately 400,000 businesses. It is this survey that is showing all the job losses. However, this survey has nothing to do with the unemployment rate. The unemployment rate is calculated by the Current Population Survey (CPS), which is commonly called the Household Survey.
Two different surveys point to two different outcomes. One survey says that job losses continued, while the other survey says that nothing changed.
But this still leaves an open question. Why did unemployment hold steady in the face of continued job losses? There are some possible answers. One possible answer would be that the unemployed did not look for work in the last 4 weeks. That would disqualify them from being unemployed. Another possible answer would be that the unemployed were looking for a full-time job, but found a part-time job instead. That would disqualify them from being unemployed.
Yet another possibility is that the Seasonal Adjustments to the unemployment rate are hiding the true picture. If you take a look at the following graph, we can see a plot of the Seasonal Adjusted Unemployment Rate versus the Non-Seasonal Adjusted Unemployment Rate. As workers are hired for the Christmas season, the unemployment rate temporarily drops. Every January, there is a spike in the unemployment rate as temporary workers are laid off after the Christmas season. For example, the Non-Seasonal Adjusted Unemployment Rate in January 2010 was 10.4% versus the Seasonal Adjusted Unemployment Rate of 9.7%
To smooth out the bumps caused by this, the BLS seasonally adjusts the numbers. There is nothing wrong with these adjustments, as long as the BLS is consistent with them.
The seasonal adjustments normally spike in January, and it did so this year by adjusting the unemployment rate downward by a record 0.91 points. In February, the unemployment rate was seasonally adjusted downward by 0.71 points. This seasonal adjustment was a record for February, and third highest overall.
What can we expect for March? For March, you can expect a seasonal adjustment downward of about 0.4 points. In addition, the Census is expected to hire approximately 100,000 people in March. Thus you can expect the unemployment rate to fall.
Since the leg up on the seasonal adjustments is so large, will the downward leg be just as large? In other words, will the seasonal adjustments make the unemployment rate worse in the coming months? We will have to wait and see, but the answer could be seen as early as the April numbers.
