Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (9348)	7/16/2004 8:26:21 AM
From: Perspective	Read Replies (2) of 116555

Jobless data smoothing: The seasonal adjustments depend critically upon the timing of the layoffs. The dirty little secret of all these attempts to "smooth" data like that is that they all assume that every year follows the previous pattern in exact timing and proportion, that you can predict this year's numbers by merely scaling the prior pattern by some factor "k". Of course, that is not true, and the larger the absolute number you are trying to smooth, the larger the error will be. Also, if anything shifts the timing of the pattern, the correction efforts fail. I find the only reasonable way to look at this stuff is to shut OFF the smoothing, and look at several years' data with the naked eye. If you ask me, our visual pattern recognition capacity as humans beats the hell out of any statistical trickery. economagic.com economagic.com You can see that we've entered the part of the annual cycle where there are usually some substantial seasonal layoffs, although not nearly as big as the year-end factor. Striking to me is how poorly the economy is performing when compared to the last 30-40 years. Look at the red line on this chart, the percentage change in employment from prior year. Our Bush "recovery" is doing worse than most of the earlier recessionary periods in year-over-year terms! economagic.com The same data on a log chart emphasizes just how serious the continuing slowdown is. Makes all prior slowdowns look trivial: economagic.com BC

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