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Wednesday, April 11, 2012

What to Look for With April Unemployment

April's unemployment rate may be key in determining whether the improvement in the U.S. jobs situation early this year was real or, alternatively, an artificial borrowing ahead of jobs due to the warm weather and an early Easter. As of April 9, Gallup's unadjusted unemployment rate stands at 8.2%, down from 8.4% in March. Using the BLS seasonal adjustment for April 2011 of +0.3 percentage points, this translates into a seasonally adjusted rate of 8.5% at this point in April 2012. While lots of time remains before the end of April, this suggests it may be well worth watching Gallup's Daily monitoring of the unadjusted unemployment rate in the days and weeks ahead.

The unemployment rate results released by the government last Friday were virtually the same as those Gallup released on Thursday. Prior to seasonal adjustment, both Gallup and the BLS reported an unemployment rate of 8.4%. In fact, Gallup's unadjusted results have closely paralleled the unadjusted BLS results since August of 2011 -- with the notable exception of February, when the spread was 0.4 points.

Gallup's seasonally adjusted rate for March was 8.1%, calculated using the BLS March 2011 seasonal adjustment of -0.3 points. The government's seasonally adjusted unemployment rate for March was 8.2%, calculated using a new 2012 seasonal adjustment of -0.2 points.

While the unemployment rate declined in March, the government's establishment survey disappointed by announcing only 120,000 new jobs created when 200,000 or more were expected. This reinforced worries that recent improvements in the jobs picture cannot be reconciled with the modest growth of the economy. It also seems consistent with claims that good weather pulled some job creation forward to January and February.

Not as well noticed is the insight provided by Gallup's Daily tracking of the unemployment rate. Gallup's seasonally adjusted unemployment rate dropped from 8.5% in mid-March to 8.1% for all of March. The question is whether this sharp decline in the last half of March is real or simply extended the pull-forward weather effects of earlier this year. Easter was early this year, on April 8 compared with last year's April 24. An early Easter not only tends to bring forward retail sales but also tends to do the same with jobs.

Since perceptions of an improving jobs situation appear to have positively affected economic confidence early this year, a reversal in Americans' job market perceptions could do just the reverse.

Thursday, April 5, 2012

Gallup Adds Seasonally Adjusted Unemployment Rate to Its Employment Measures

Gallup today released its first seasonally adjusted unemployment rate trend. This series is based on the unadjusted unemployment rates Gallup has been reporting since January 2010. Each month, Gallup will now provide both an unadjusted as well as a seasonally adjusted unemployment rate based on the seasonal adjustment used by the Bureau of Labor Statistics (BLS) in the same month of the previous year.

Gallup's March unadjusted unemployment rate is 8.4% and its seasonally adjusted rate is 8.1%. Gallup's seasonally adjusted unemployment rate trend is generally consistent with the official BLS unemployment rate trend used in the past couple of years.

Gallup will continue to report its core unemployment metrics on an unadjusted basis. Gallup believes that its unadjusted metrics provide key insights into what is actually happening in the marketplace to Americans working and looking for work as well as in the overall economy. Gallup's metrics are based on a random sample of approximately 30,000 Americans each month, and follow the same general procedures as used by the BLS, with some methodological differences.

At the same time, we have determined that releasing a seasonally adjusted unemployment rate series provides some additional benefits, including:

  • Allowing comparison of data across months on a fair basis when seasonal factors might otherwise affect the individual monthly results.
  • Providing for analysis of underlying trends in the data by excluding seasonal variations.
  • Producing more clarity about how Gallup's unemployment data relate to the results the BLS reports on a monthly basis.
Gallup finds this to be a good time to provide seasonally adjusted data. The factors associated with the 2008-2009 recession and financial crisis are now dissipating, increasing the accuracy of the seasonal adjustment process. Gallup now feels comfortable reporting a seasonally adjusted unemployment rate series dating back to January 2010.

The importance of adding Gallup's seasonally adjusted unemployment rate to Gallup's overall unemployment reporting is illustrated by Gallup's unemployment results early this year. On an unadjusted basis, Gallup's U.S. unemployment rate was 8.4% in March, down from 9.1% in February. Seasonally adjusting both months, based on the BLS adjustment process used in the prior year, provides a Gallup rate of 8.1% in March compared with an 8.6% rate in February. Both measures accurately reflect the month-to-month change in the unemployment rate as measured by Gallup. But, by seasonally adjusting the data, the Gallup results provide an enhanced context for those seeking to compare the numbers to the BLS seasonally adjusted rate of 8.3% for February.

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