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Thursday, January 31, 2008

The Perils Of Seasonal Adjustments

The headline number on initial claims is a kind of dire 375,000, but actually this is the seasonal adjustment kicking in. If you look at the underlying claims, they are a relatively benign 366,891, compared to the prior two weeks' numbers of 415,149 and 547,506, which were seasonally adjusted to 306,000 and 300,000. This week's NSA claims is only about 7,000 above last year's.

So really, it doesn't look too bad. The employment situation continues to worsen, but slowly. Since January 5th we have cleared about 250,000 people from continuing claims. I would hope that at least 170,000 of those found jobs rather than running out their unemployment benefits. Of course there is always early retirement, and at this point some of the older workers may choose to run out their benefits and then do that.

Personal Income for December was neither good nor bad. In terms of chained 2000 dollars, disposable personal income rose 0.2 in December after falling 0.1 and 0.2 in October and November. PCE stated in chained 2000 dollars was flat at 0.0. I don't have a lot of confidence in these numbers. They are extrapolations, and figures from earlier in the year were restated significantly recently.

What I am watching most is non-farm proprietors' incomes:
Nonfarm proprietors' income decreased $2.8 billion, in contrast to an increase of $8.6 billion
PCE was revised downward for October and November. It looks like Q4 preliminary GDP might be revised downward from the advance. Of course, PCE is just one piece of it.


Comments:
I think it will worsen very quickly as more companies realize we're going into recession. That was a very impressive spike, and I suspect more than just seasonal.

I know a lot of kids who were hired "seasonally" and kept those jobs, and now am seeing older, better-paid workers are the ones getting laid off. It's a bit more than just seasonal when companies are moving to keep on younger, cheaper employees and letting the older, costlier ones go.
 
Donna - in CA, yes, I believe that.
 
Yeah, just another one of those things to keep you at low paying work. If they give you a raise, then you're more likely to get laid off.

More anecdotal reporting from me:
It's billing time and I am seeing a bit more stress than normal. (Our system has been changed to shut down service after 28 days of non-pay, which is a big change from the 60 days we gave them when I started.) Mostly I see people who always have trouble paying their bills who've given up being surprised that their service has been shut down, folks who are shopping for the cheapest possible pricing (voip has done well with these folks) and people shuffling credit cards. I'm surprised to see that we still have folks moving and that should imply that they've been able to sell their current homes. This is basically a resort town now, and so there are still people able to buy houses.

Another story; our friend's son is in construction. They had to shut down their current job due to snow. The foreman told them to go ahead and claim this week as their waiting week, since that would count as a waiting week for the whole year. Seems to me that they are expecting to lay off at some point. They probably expect that in construction, but it may be longer than normal before they can get working again.
 
If it's any consolation, I think the same is being experienced all over. Not drastic, but just a slow trickle downwards for most of the country.

The Midwest is actually doing a bit better for the most part, perhaps because of farming.
 
MoM, the devil of it is that if the Midwest is doing better due to the ripple effect across crops caused by the corn ethanol subsidies, that is not exactly a plus. After all, we all have to eat and if the crop prices are high we will see the prices rise at the grocer's. So we trade one region doing okay for everyone else doing a bit worse ...
 
I agree on the ethanol stupidity. Growing corn to make fuel is the most lunatic thing I have ever heard of. Some other biofuels seem to make a lot more sense.

Not only is it bad for the economy, it's also bad for the environment. But it is an election year, so Congress recently passed an extension and expansion of the ethanol subsidies.
 
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