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‘Seasonally Adjusted’: Is Housing Market Improving, or Not?

Five years of the Obama economy render the government's seasonally adjusted numbers virtually worthless.

by
Tom Blumer

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March 25, 2013 - 9:38 am
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Attempting to interpret economic data produced by the federal government these days while merely looking at its published seasonally adjusted results is a dangerous exercise. Anyone doing so is by definition hoping that the statisticians’ concocted forest represents what’s really going on down there in the trees. Yet now, more than at any time since World War II, that is not the case.

The Department of Labor, its Bureau of Labor Statistics, the Census Bureau, and other federal data compilers generally perform their seasonal adjustment calculations based on data from the previous five years. That wouldn’t be a big problem, except for one thing: we haven’t had normal seasonal relationships since the POR (Pelosi-Obama-Reid) economy began in the late spring of 2008, almost five years ago.

Because of the POR economy, the influences of the recession and three straight subsequently weak “recovery summers” following on the heels of somewhat strong winters have preempted typical seasonal fluctuations.

Seasonal adjustment is a valid statistical smoothing tool: when applied in normal circumstances, it can provide a quick and reasonably reliable reading on how a particular month’s or week’s actual (i.e., not seasonally adjusted) reading compares to the immediately preceding period. But far too many people, especially those in the business press, fail to consider — because of ignorance, laziness, or both — that the seasonally adjusted numbers, even in the best of times, aren’t real (heaven help us, I’ve actually had a wire service reporter try to claim that the government considers them as such in an email).

Today, in the midst of the weakest “recovery” seen since World War II — caused by the worst economic stewardship seen in a presidential administration (with the help of a co-opted Federal Reserve) since Franklin Delano Roosevelt lengthened the Great Depression by more than eight years with his New Deal statism — the seasonally adjusted numbers can be very misleading.

One such example can be found in the Census Bureau’s recent report on home construction, particularly housing starts.

On March 19, the bureau reported that homebuilders started work on 62,400 housing units in February; 41,600 of those units were single-family homes. Both raw figures were only marginally higher than the average of the previous three months.

The website Zerohedge pointed out that February’s overall figure was only 200 units higher than the 62,200 seen in November 2012, but that February’s seasonally adjusted annual rate was somehow 76,000 units higher (917,000 vs. 841,000).

That in and of itself isn’t a concern, but Zerohedge further noted that the seasonally adjusted rate was far greater than one would have expected based on comparing raw numbers during the industry’s slow November-February time frame in previous years.

How that February 2013 figure came about in its historical context perfectly illustrates the problem with blind reliance on seasonally adjusted data:

HousingStartsChart2009to2013

February’s housing starts as a percentage of the previous 12 months (including February itself) averaged 6.75 percent from 1995-2008. The five-year averages during that time were stable, remaining between 6.50 percent and 7.03 percent.

Then the POR economy kicked in. Since then, as seen above, the results have been all over the place.

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All Comments   (10)
All Comments   (10)
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Seasonally adjusted housing starts are up from total crap! To just crap. We are headed in the right direction!! sarc/off
With all the pandering by the press (and all their good news in the last 4 years) you might believe we are in a major boom.

It is almost beyond believe! The press is the enemy of our country, and us.
1 year ago
1 year ago Link To Comment
NOT! Counterfeiting, and printing money is like sugar rush. Most know what happens when it wears off kinda of like the caffeine rush. You crash!
1 year ago
1 year ago Link To Comment
1984's Ministry of Truth is here. Government keeps making up lies to cover up its failures and present them as successes. You just can't trust anything the government says.
1 year ago
1 year ago Link To Comment
It was the "flippers" who help to "flip" things up the last time and will "flip" it up again.
1 year ago
1 year ago Link To Comment
Curt, I didn't see much evidence of house flipping here in the suburbs North of Dallas. Right now it's a seller's market for starter castles with a limited number of houses selling within a couple weeks of being listed. Almost all the houses I looked at were currently occupied by families. I only saw one foreclosure and one short sale. Both were not selling because they were priced too high. Houses priced right get multiple offers within days. The supply shortage will be corrected with new construction, but houses take time to build and builders are being somewhat cautious as they restart construction.
1 year ago
1 year ago Link To Comment
Thanks for writing this post, Tom. This morning I heard the AP line that the housing market was rebounding. The proof? Home sales were on the rise, not be individuals or families, but investors seeking to become land lords.

That's improvement? More people will be renting homes. Yep, the POR economy chugging away through recovery.
1 year ago
1 year ago Link To Comment
The text is right, but the "Febuary Seasonally Adjusted Housing Start" chart had a small error.

Feb 1995 - Feb 2006 2008 AVG.
1 year ago
1 year ago Link To Comment
Thanks. Fixed. Gremlins.
1 year ago
1 year ago Link To Comment
Us unsubtle rubes don't know the difference between reeducation, relocation, and concentration camps. We don't know what inflation is now, or what it used to be. We don't know what unemployment means. We are informed by elites who think that our lack of bread could be fixed by eating cake. It is as if Humpty Dumpty fell down a rabbit hole.

"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean—neither more nor less." Such is the language of our business and political elites.
1 year ago
1 year ago Link To Comment
All this is true, as Tom eloquently points out. But the Lamestream Media business press doesn't care. They helped get Obama elected. They did their work that was required of them. They don't want to print the truth about how abysmal the Obama economy is and has been for the past 4 years. Doing that prevents them from getting access to the Obama press minions. Their editors want stores about how rosy the economy is. Printing bad news denies them that kind of access. Besides, and Tom is correct, the business media is intellectually lazy and lazy, period. They want news releases. They don't want to actually have to dig for information.
1 year ago
1 year ago Link To Comment
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