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Brookings on Job Numbers

June a strong month for jobs growth

The Bureau of Labor Statistics (BLS) employment report released today shows that 222,000 new jobs were added in June. In this blog post, I will put forward three alternative projections for job growth in June 2017, each of which was calculated using methodology outlined in my past research. Applying a more stable seasonal adjustment to the raw data, and accounting for the effects of weather on employment yields 222,000 jobs, which is identical to the BLS Official number.

Calculating the Alternative Seasonal Adjustment

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

Author

In my 2013 paper “Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I find 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.

To produce the Alternative Seasonal Adjustment, I calculate the month-over-month change in total nonfarm payrolls, seasonally adjusted by the 3×9 filter, for the most recent month, which you can see in table below. The corresponding data as published by the BLS are shown for comparison purposes. According to the Alternative Seasonal Adjustment, the economy added 217,000 jobs in June, only slightly below the official BLS total of 222,000.

Calculating the Seasonal and Weather Adjustment

In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my 2015 paper “Weather-Adjusting Economic Data,” Michael Boldin and I 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.

Temperatures in June were near historical averages, resulting in a negligible weather effect of –3,000 jobs, which translates to a Seasonal and Weather Adjustment estimate of 225,000 new jobs.

Combining the Alternative Seasonal and Weather Adjustments

My Alternative Seasonal Adjustment shows lower job gains than reported by the BLS, but the Seasonal and Weather Adjustment shows higher job gains. One can indeed do the two adjustments jointly—both adjusting for weather effects and using a longer window. This is shown in the far-right column of the table labeled Combined Alternative Seasonal and Weather Adjustment.

Making both adjustments, the employment change in June was an increase of 222,000 jobs, identical to the BLS Official number. According to the Alternative Seasonal and Weather Adjustment, the economy has added 180,000 monthly jobs on average for the first half of this year, only slightly below last year’s pace of 188,000. The BLS Official averages for the first six months of 2016 and 2017 are both 180,000 jobs. June 2017 was a strong month for jobs growth, no matter how you cut it.

Thousands of jobs added BLS Official Alternative Seasonal Adjustment[1] Seasonal and Weather Adjustment[2] Weather Effect[3] Combined Alternative Seasonal and Weather Adjustment[4]
2017-June 222 217 225 -3 222
2017-May 152 137 175 -23 152
2017-April 207 188 165 +42 168
2017-March 50 28 110 -60 85
2017-February 232 251 209 +23 221
2017-January 216 200 197 +19 187
2016-December 155 166 156 -1 161
2016-November 164 176 171 -7 177
2016-October 124 133 122 +2 135
2016-September 249 237 264 -15 240
2016-August 176 170 166 +10 175
2016-July 291 317 291 +0 310
2016-June 297 285 288 +9 288

Note: Changes in previous months’ numbers reflect revisions to the underlying data.

[1] Applies a longer window estimate of seasonal effects (see Wright 2013).

[2] Includes seasonal and weather adjustments, where seasonal adjustments are estimated using the BLS window specifications (see Boldin & Wright 2015).

[3] BLS Official number less the Seasonal and Weather Adjustment number.

[4] Includes seasonal and weather adjustments, where seasonal adjustments are estimated using a longer window estimate.


The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. He is currently not an officer, director, or board member of any organization with an interest in this article.

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