Liar Liar….Unemployment Claims Improve But It’s a Manipulation Mirage

Mish

The BLS changed its seasonal adjustment model starting today going forward. The change skewed the data in a positive manner.

Additive vs Multiplicative Method Change

BLS Explanation

Beginning with the Unemployment Insurance (UI) Weekly Claims News Release issued Thursday, September 3, 2020, the methodology used to seasonally adjust the national initial claims and continued claims reflects additive factors as opposed to multiplicative factors. 

Seasonal adjustment factors can be either multiplicative or additive. A multiplicative seasonal effect is assumed to be proportional to the level of the series. A sudden large increase in the level of the series will be accompanied by a proportionally large seasonal effect. In contrast, an additive seasonal effect is assumed to be unaffected by the level of the series. In times of relative economic stability, the multiplicative option is generally preferred over the additive option. However, in the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions…..more here

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