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Children play in a fountain during a heat wave in Washington, U.S., July 24, 2016.      REUTERS/Joshua Roberts - RTSJFRQ
Brookings on Job Numbers

Unseasonably warm weather slightly boosts employment for all three months of summer 2016

August’s jobs gains, released this morning, show that 151,000 new jobs were added in August, marking 71 straight months of positive jobs growth, dating back to October of 2010. After a disappointing jobs report in May, significant jobs growth in summer 2016 is a positive sign.

Monthly job gains and losses can indicate how the economy is doing once they are corrected to account for the pattern we already expect in a process called seasonal adjustment. The approach for this seasonal adjustment that is presently used by the Bureau of Labor Statistics (BLS) puts very heavy weight on the current and last two years of data in assessing what are the typical patterns for each month.

In my paper “Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I found that using a different seasonal filter, known as the 3×9 filter, produces better results and more accurate forecasts by emphasizing more years of data. The 3×9 filter spreads weight over the most recent six years in estimating seasonal patterns, which makes them more stable over time than the current BLS seasonal adjustment method.

I calculate the month-over-month change in total nonfarm payrolls, seasonally adjusted by the 3×9 filter, for the most recent month. The corresponding data as published by the BLS are shown for comparison purposes. According to the alternative seasonal adjustment, the economy added 141,000 jobs in August (column Wright SA), 10,000 fewer than the official BLS total of 151,000 (column BLS Official).

In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my paper “Weather-Adjusting Economic Data” I and my coauthor Michael Boldin implement a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. We use several indicators of weather, including temperature and snowfall.

We calculate that unseasonably warm weather in August had a small, positive effect on employment (column Weather Effect), boosting employment by 16,000 jobs. In fact, all three months of summer 2016 show positive weather effects.

But the key thing is that these weather and seasonal effects are small. With or without any adjustment, the August pace of jobs growth reported this morning was slightly below the average for the year to date, but the difference is minor relative to sampling error and the typical magnitude of revisions.

All in all, employment numbers for summer 2016 are encouraging. Let’s celebrate by taking Monday off. Happy Labor Day!

jobsAug2016

 

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For more recent analysis by Brookings experts on how weather and seasonality have affected the latest jobs numbers, visit our page on adjusting the monthly jobs numbers.

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