Wall Street experienced a sharp rise on Friday following the release of the latest United States employment and unemployment data.
The headlines claimed that the US economy created 243,000 additional nonfarm jobs during January and the unemployment rate dropped from 8.5% to 8.3%.
However these were seasonally adjusted, the actual figures were quite different.
The actual figures were as follows;
| Total nonfarm jobs, December 2011 | 132,952,000 |
| Total nonfarm jobs, January 2012 | 130,263,000 |
| Change | (2,689,000) |
The seasonally adjusted figures were as follows;
| Total nonfarm jobs, December 2011 | 132,166,000 |
| Total nonfarm jobs, January 2012 | 132,409,000 |
| Change | +243,000 |
The seasonally adjusted figures take into account that a large number of jobs pre-Christmas are temporary. Thus the actual December figure is multiplied by 0.994088 to get the seasonally adjusted figure and the actual January figure is multiplied by 1.016474 to get the seasonally adjusted figure.
But what happens if these seasonally adjusted multipliers are wrong? This is a valid question because the seasonally adjusted multiplier is often changed.
If the January multiplier was 1.013000 instead of 1.016474 than the US economy would have lost 210,000 nonfarm jobs instead of a gain of 243,000.
The message here is that seasonally adjusted figures have to be treated with extreme caution.
Brian Gaynor