Revised Methodology for Seasonal Adjustment of Weekly UI Claims Q&A

Questions and Answers

Each year, the Bureau of Labor Statistics seasonally adjusts weekly initial and continued claims data collected by the Employment and Training Administration from cooperating States. The current method of seasonal adjustment has been used for at least two decades and was developed by staff of the Federal Reserve and BLS. The revised method was developed by the FRB.

1. Why is the method for seasonally adjusting weekly unemployment insurance (UI) claims being revised?

In recent years, concerns have been voiced about the volatility in the weekly seasonally adjusted initial claims estimates during highly seasonal periods. An alternate method developed by the FRB was evaluated and found to improve the weekly seasonal adjustment over such periods.

2. How does the new method compare to the old?

The current method of seasonal adjustment assumes that the claims series have a fixed seasonality. That is, the claims data reflect a holiday or regular seasonal event the same way each year and the seasonal factors change only from the effects of the calendar. The revised method assumes that the claims series exhibit variation in response to a seasonal event (moving seasonality). The revised method allows the coefficients that determine the factors to change over time in addition to reflecting the change based on calendar effects. (As part of testing the revised method, it was confirmed that the claims series does in fact exhibit moving seasonality.)

In the development of current weekly seasonal factors, the revised method uses claims data from the first few weeks of January. Extending the period into the current year more fully accounts for claimant activity during the holiday period and better captures seasonal movement. The current method incorporates data only through December of the prior year in the development of new seasonal factors.

3. When will factors developed using the revised methodology be released?

Factors developed using the revised methodology will be released on April 11, 2002, and will relate to claims data for the week ending April 6, 2002.

4. Where can one obtain more information about the revision to the seasonal adjustment methodology?

Tom Stengle, ETA, 202-693-2991