Saturday, February 27, 2010
Friday, February 26, 2010
What is SAAR - it sounds like a disease!
SAAR - stands for seasonally adjusted annualized rate. This is frequently used in economics when looking at or comparing different statistical data. The basic reason SAAR is used is to remove fluctuations that may influence the data due to seasonality.
A classic example would be data on ice cream sales. To compare ice cream sales from February to August we must first account for the seasons , namely in February it is the dead of winter and you are much less likely to consume ice cream versus in August when it may be over 100 degrees in the northern hemisphere when you might consume more than your share of the tasty stuff.
To compare this data apples to apples, economists frequently adjust the monthly data by applying a seasonal factor. So what is this magical seasonal factor you might ask? The seasonal factor is actually derived from a lot of the historical data in our case ice cream sales. After studying the data a pattern emerges from which seasonal factors can be constucted.
So in our example the measly true sales number from February is divided by the seasonal factor to arrive at a seasonally adjusted number of ice cream sales that we can now compare to the ice cream sales in August. As you may have guessed the seasonal factor for ice cream in Feburary in our example would be less than 1 and for the month of August it would be greater than 1.
Since this post is getting quite large and I haven't explained anuualized part I will tackle that in the next post.
Continue Reading
A classic example would be data on ice cream sales. To compare ice cream sales from February to August we must first account for the seasons , namely in February it is the dead of winter and you are much less likely to consume ice cream versus in August when it may be over 100 degrees in the northern hemisphere when you might consume more than your share of the tasty stuff.
To compare this data apples to apples, economists frequently adjust the monthly data by applying a seasonal factor. So what is this magical seasonal factor you might ask? The seasonal factor is actually derived from a lot of the historical data in our case ice cream sales. After studying the data a pattern emerges from which seasonal factors can be constucted.
So in our example the measly true sales number from February is divided by the seasonal factor to arrive at a seasonally adjusted number of ice cream sales that we can now compare to the ice cream sales in August. As you may have guessed the seasonal factor for ice cream in Feburary in our example would be less than 1 and for the month of August it would be greater than 1.
Since this post is getting quite large and I haven't explained anuualized part I will tackle that in the next post.
Thursday, February 25, 2010
The reporter said – Businesses hired last month but the unemployment rate went up? I am confused , how can that be?
Yes there is a lot of confusion when it comes to the nation’s unemployment rate. Statements like above are routinely made on tv and also you read about it in publications. Hopefully the explanation below should clear up the confusion.
First of all the unemployment rate is released on the 1st Friday of every month. That is when the Bureau of Labor Statistics, BLS for short releases the unemployment rate to the
Public. Actually and if you want to get really technical about it, the BLS summons a bunch of reporters to a secret location to release the employment situation report to them
Around 8am.
The reporters in turn release it to the public around 8:30am. This is due to the sensitive nature of this statistic we call unemployment rate. Sorry to go off the tangent here,
Anyway back to trying to clear up the confusion as to why the unemployment rate went up even though businesses added jobs.
The BLS does two surveys as part of the employment situation report. One is called the payroll survey where they find out from businesses if they have shed jobs or hired people. The other survey is called the civilian survey and the BLS surveys ordinary people like you and me to find out if we are employed or out of work etc. The unemployment rate is calculated using the civilian survey. Therefore it is possible that the businesses really added jobs but the unemployment rate really went up at the same time as they are part of two different samples.
Hope this clears up the confusion as it did for me as this is also a very closely watched number at the political, business and the public level.
Continue Reading
First of all the unemployment rate is released on the 1st Friday of every month. That is when the Bureau of Labor Statistics, BLS for short releases the unemployment rate to the
Public. Actually and if you want to get really technical about it, the BLS summons a bunch of reporters to a secret location to release the employment situation report to them
Around 8am.
The reporters in turn release it to the public around 8:30am. This is due to the sensitive nature of this statistic we call unemployment rate. Sorry to go off the tangent here,
Anyway back to trying to clear up the confusion as to why the unemployment rate went up even though businesses added jobs.
The BLS does two surveys as part of the employment situation report. One is called the payroll survey where they find out from businesses if they have shed jobs or hired people. The other survey is called the civilian survey and the BLS surveys ordinary people like you and me to find out if we are employed or out of work etc. The unemployment rate is calculated using the civilian survey. Therefore it is possible that the businesses really added jobs but the unemployment rate really went up at the same time as they are part of two different samples.
Hope this clears up the confusion as it did for me as this is also a very closely watched number at the political, business and the public level.
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