Monday, July 13, 2015

What Seasonally-Adjusted U.S. Economic Data Needs Most... non-adjustment. This is not a minor issue: there's not even an unadjusted U.S. GDP! 

Seasonal adjustment is sometimes desirable, but sometimes not. Sometimes it's done poorly, sometimes it's better done with extra care and transparency by the researcher, etc. And the restrictions implied by economic theory generally hold across all frequencies, not just non-seasonal frequencies. There are many, many issues. (See, for example, the discussion in Hansen and Sargent (1993) and the references there.) 

Sometimes seasonality is the center of attention, and hence of intrinsic interest, so access to unadjusted data is crucial. But even when seasonality is arguably just a "nuisance," it's valuable to have access to unadjusted series, which are more fundamental. If I have an unadjusted series, I can adjust it myself, and then you and I can have a potentially valuable discussion as to how and why I adjusted it. In contrast, if I have only an adjusted series, in general I have no way to recover the underlying unadjusted series, so you and I have no choice but to rely completely on agencies' seasonal-adjustment procedures and their many embedded judgments.

Let me be clear: Both academic researchers and the data-providing agencies have made important seasonal-adjustment advances over many decades. I'm grateful and I hope they continue. I'm simply saying that we should also have access to unadjusted data. So let me add to the seasonality research "to-do list" that I recently offered

Any series provided in seasonally-adjusted form should also be provided in unadjusted form.