Economists Do It With Models

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Adventures In Bad Journalism, Seasonal Adjustment Edition…

March 13th, 2015 · 1 Comment
Fun With Data · Macroeconomics

I didn’t entirely believe that Justin was serious the first time I read this:

Because really, what? You’re probably not shocked that I went down the rabbit hole of looking for the original article…and yup, there it is, plain as day:

It is useful for policy-making purposes to adjust monthly data to an expected annual rate. But the current method needs to be updated and based on something other than the weather.

Somewhere in this process I managed to get into a Twitter spat with Phil Izzo, who defended his employer (the WSJ) by pointing out that the article was written by a Harvard Business School professor and not one of the journal’s journalists. (For the record, I generally think that Phil is a good dude.) What started this was a comment that I made about how journalists should have subject matter expertise, so I responded by pointing out that editors are journalists too. I don’t care if something is in the “opinion” section or not, it’s gotta be vetted for the crazy sauce. In this case, even the author’s job title wasn’t vetted, since he’s been retired for a while as far as I can tell. (Emeritus, people, come on.) Otherwise, people get mislead by the parts of the “opinion” pieces that aren’t actually opinions, and five thirty eight has to spend its time trying to combat the absurdity:

This is so wrong that it’s hard to know where to begin. First, seasonal adjustment isn’t entirely, or even primarily, about the weather. It’s about accounting for recurring patterns, whatever they may be. Tax preparation firms hire lots of people every spring and then lay them off after April 15. Landscaping firms employ far more people in the summer than in the winter. Automakers shut down their factories each summer to change over to the new model year.

But Mills doesn’t make that argument. Instead, he writes: “The [Bureau of Labor Statistics] should report both seasonally adjusted and actual figures each month.” But of course, the BLS already does this — which Mills knows, because that’s where he gets his “2.7 million jobs” figure from the first paragraph of his story.

I figured I should do my part too, so I answered in the form of a video about the jobs report and a very simple seasonal adjustment example, and some fun new visual tricks:

I think I kind of like looking like I’m trapped in numbers jail.

Update: I’m not the only one on the case…

Tags: Fun With Data · Macroeconomics

1 response so far ↓

  • 1 Tuleyb // Apr 3, 2015 at 4:41 pm

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