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LMI Myth Busting Series
LMI Myth Busting: Seasonal Adjustment
Myth:
To show the impact seasonal events like winter weather has on employment levels, it is best to use seasonally adjusted data.
Busted:
Actually, just the opposite is true. The process of seasonally adjusting data removes the impacts of seasonal events like winter weather.
Over the course of a year, employment levels undergo sharp fluctuations due to such seasonal events as changes in weather, harvest, major holidays and the opening and closing of schools. Because these seasonal events follow a more or less regular pattern each year, their influence on statistical trends can be eliminated by adjusting the statistics from month to month. Seasonal adjustments make it easier to observe underlying trends that are more truly economic—such as cyclical trends and other nonseasonal movements in a data series.
The graph below illustrates the impact of seasonal adjustment, using monthly South Dakota labor force estimates for a recent 12-month period. The blue line shows actual labor force levels each month. As you can see, the size of the labor force peaked in July and was at its lowest point in January 2019. A January low is typical for South Dakota, related in part to the coldest weather. For example, cold January temperatures hamper many types of construction work. January also commonly brings employment declines in retail trade following the holiday shopping season when retailers are at full staff.
The orange line in the graph above displays the seasonally adjusted labor force estimates each month. As you can see, it is a much smoother line, with the sharp fluctuations from month to month removed through seasonal adjustment process.
Seasonally adjusted data is available for the following in South Dakota:
- Labor force estimates (including employment and unemployment levels and the unemployment rate) for statewide South Dakota and the Metropolitan Statistical Areas (MSAs) of Rapid City and Sioux Falls.
- Nonfarm wage and salaried worker estimates (by industry) for statewide South Dakota.
The seasonally adjusted data for each of these series is available in the virtual labor market data system. For seasonally adjusted labor force data, use the link and instructions on our Labor Force menu page. For seasonally adjusted nonfarm worker data by industry, use the link and instructions on our Nonfarm Wage and Salaried Workers menu page.
In either case, within the virtual system within the Search options and next to the “Seasonally Adjusted” category, simply click on the underlined “Not seasonally adjusted” text to access the drop-down box where you can change to “Seasonally adjusted” as shown in the screen shot below.
For assistance using the virtual system or to obtain seasonally adjusted labor force or nonfarm data, please contact us.
Seasonal adjustment is also explained on our Definitions page.