President Reagan, obviously eager to blunt the impact of news about April's 9.4 percent unemployment rate, which was the highest since the Great Depression, once again has complained that seasonal adjustment may be distorting economic reality.
According to the unadjusted numbers, unemployment fell by 300,000 in April and the number of people with jobs went up by 400,000, Reagan said. "I'm not sure we live in a seasonally adjusted world," he declared. "I feel these . . . figures should not be buried or ignored by the press."
While he did not say so expressly, the president appeared to be suggesting that the economy has begun to improve.
If the press ignores the actual figures in favor of those that are seasonally adjusted, it is because virtually every economic analyst--including those in the administration--does, too. The president's Council of Economic Advisers, for example, didn't even include the unadjusted figures in the 10 pages of statistics on the labor force, employment and unemployment in this year's Economic Report.
"I usually use the seasonally adjusted numbers. That's my approach," CEA Chairman Murray L. Weidenbaum said. "I look at the seasonally adjusted numbers to get a feel for the trend." But Weidenbaum added, "If you are looking at a point in time, the unadjusted number is the actual number of people out of work."
The whole point of seasonal adjustment is to filter out the economic changes that occur in the same way every year.
Each year, for instance, the unemployment rate surges by more than a full percentage point in January as the result of the layoff of workers in a wide range of businesses that benefit from the rush of consumer spending during the Christmas season. At the same time, many other workers on outdoor jobs, such as construction, also are laid off as the weather in northern states worsens.
A similar but smaller surge of about 0.6 percentage point usually occurs in June as high school and college students leave the classroom and hunt for jobs. "Now I'm sure that next month, when 750,000 or more young people are suddenly out of school, the adjusted figures might look better than the unadjusted," Reagan noted. "But shouldn't we be allowed to see both?"
Reagan is obviously right in saying people do not live in a seasonally adjusted world. A department store clerk let go on Christmas Eve is no less unemployed than any other member of the labor force who wants a job but doesn't have one. A student looking for a summer job is unemployed, too.
But the occurrence of Christmas each year is not news. Nor is the coming of spring. An economist trying to sort out the always confusing crosscurrents of a $3 trillion economy is interested not in the normal seasonal changes, but in what remains once those changes are eliminated.
In April, the number of persons with jobs rose to 98.9 million from 98.5 million in March, while the number of people unemployed fell from 10.3 million to 9.96 million.
Unfortunately, the increase in employment and the drop in unemployment were less than is usual in April, often the first month of the year with really good weather in much of the North. Thus, after allowing for these seasonal factors, the opposite picture emerges: The number of people with jobs in April, seasonally adjusted, stood at 99.3 million, down from the adjusted March figure of 99.5 million, and the adjusted number of unemployed workers rose by 453,000 to 10.3 million.
Which picture is more accurate? The answer depends in part on why one is asking the question.
The unadjusted numbers show actual conditions in April--within the limits of the statistical techniques of sampling and error that affect both sets of numbers. But it is only after seasonal adjustment that a key piece of information becomes apparent, namely, that the rise in employment was well below normal.
For a president deeply immersed in an economic policy debate, and for the economists who are advising him, the fact that spring has indeed arrived seems less important than that it has brought with it a smaller-than-usual rebound in jobs.
"I wonder . . . if the news media couldn't serve us better if they would give us more of the statistical information on unemployment provided by the Bureau of Labor Statistics," Reagan said. Would he have really been happier last winter if the press had highlighted that the unemployment rate, before adjustment, rose from 8.3 percent in December to 9.4 percent in January and on to 9.6 percent in February? The 9.6 percent rate is a record for the postwar period. Actually, on an unadjusted basis, all four months of 1982 have been higher than then previous postwar record of 9.1 percent set in 1975.
As for April, was the economy really improving? Well, economist Alan Greenspan, an occasional private adviser to Reagan, put it this way: "The slide in the U.S. economy clearly continued in April. . . . There is no evidence of an end to the recession in the April employment data."