FLASH UPDATE
December Payroll Seasonal-Adjustment Problem

January 6, 2012

__________

Seasonal-Adjustment Problem Inflated December’s 200,000 Payroll Gain by 42,000

__________

PLEASE NOTE: This Flash Update previews an unusual problem in today’s payroll reporting.  The full, regular Commentary No. 411 will follow in due course, later today, addressing a number of other issues.

Best wishes to all — John Williams

False Seasonal Boost Given to “Couriers and Messengers” Category

The reported seasonally-adjusted 200,000 jobs surge in December 2011 payrolls included a false, seasonally-adjusted gain of roughly 42,000 in the “Couriers and Messengers” category.  That gain was an artifact of the seasonal-adjustment process and will remove itself in the January 2012 numbers.

We were aware of what seemed to be a buried modeling problem within the Bureau of Labor Statistics’ (BLS) adjustment process, which we expected to come to the fore today and to be modified by the BLS, but the BLS did not correct the series.  The “Couriers and Messengers” series has been suffering a problem with a seasonal December effect that has affected a couple of past Decembers, and today, it affected the December 2011 numbers.

As noted in the BLS press release of January 6th:

“Employment in transportation and warehousing rose sharply in December (+50,000).  Almost all of the gain occurred in the couriers and messengers industry (+42,000); seasonal hiring was particularly strong in December.”

The problem is that this 42,000 gain is part of a seasonal pattern that fully reverses itself each January, as shown in the following BLS graph.  The shown detail is seasonally-adjusted.  The issue, though, is that with proper seasonal adjustment, the spikes shown in December 2011 and a couple of years prior should not be there.  The BLS forecast output for this series, based on past trends, predicted such a rise for December 2011.  It also predicts a similar sized, corrective decline in January 2012.

We asked the BLS for a comment this morning and were told that it was a modeling issue, which the BLS cannot override.  There may be other related problems in current reporting, but the 42,000 jobs surge in “Couriers and Messengers” appears to have been the biggest single issue.

__________