Employment Situation: the effect of population controls and seasonal adjustment

When interpreting labor statistics one should be very careful with Januaries. This is the month when major changes to the population estimates (including so called population controls, i.e. the distribution of population over age/sex/race) are introduced. Briefly, all corrections to the overall population and its components gathered during the previous year, or ten years after decennial censuses, are introduced in January as a step in the relevant times series by the Bureau of Labor Statistics. The Bureau explicitly explains this trick in its documents.

Figure 1 shows how big were these corrections in January 2012. We have displayed the first differences of several time series.  The population corrections (the updated population controls) are applied to the civilian population (16 years and over), CP. The level of labor force, LF, the employment, E, and the number of unemployed, UE, is recalculated accordingly as the portions of the CP measured in the household surveys, e.g. the rate of unemployment. The 2012 correction is the highest since 2003, when the 2000 census was inserted in the time series.  The adjustments to the population estimates change these rates only slightly. For example, the unemployment rate does not change and the employment-population ration rose due to the adjustment to the population controls. In January 2012, the civilian noninstitutional population rose by 1685000 including 1510000 due to the change in the population controls.  This number is higher than in 2003, when the 2000 census was included in the CP estimates. 

Another issue is the rate of unemployment. The population controls do not change this rate much. Figure 2 compares the rates as obtained with and without seasonal adjustment. The NSA rate for January is 8.8% due to peaks in this rate in January 2010 (10.6%) and 2011 (9.8%). The NSA rate will be also above the SA rate in February as well.

Figure 3 shows the number of unemployed. In January 2012, it increased by 849,000 in absolute values and decreased by 330,000 in seasonally adjusted representation.  The absolute growth is partially related to the change in population estimates (controls) and partially to the seasonal adjustment.

  Figure 1. The first differences of the civilian population (16 years and over), CP, the level of labor force, LF, the employment, E, and the number of unemployed, UE, time series. The 2012 correction is the highest since 2003, when the 2000 census was inserted in the time series.

Figure 2.  The rate of unemployment, UER, as measured with  seasonal adjustment, SA, and without seasonal adjustment,  NSA.  The NSA value for January is 8.8%.

Figure 3.  The number of unemployed, UE, as measured with seasonal adjustment, SA, and without seasonal adjustment,  NSA.