BEA Backs Up Census; Residual Seasonality Struck A Month Too Soon

Over the last decade, the US economy has been experiencing “residual seasonality”. It has begun each year unusually weak. For Economists expecting it take off in each and everyone, this is more than a thorny contradiction. When it happened again in 2015, at the worst possible moment for the mainstream view, they had finally had enough.

The Bureau of Economic Analysis was called out for what was surely a quirk in their statistical processes. The BEA in response promised an exhaustive review, a comprehensive search to find this “residual seasonality” and then get rid of it from their data.

True to form, they didn’t find any evidence of statistical malfeasance but “fixed” their seasonal adjustments anyway. The squeaky wheel does get the revision.

What really had happened was very simple. Income growth like the overall labor market never really recovered after the Great “Recession.” As such, Americans still like to splurge at Christmas as best they can only now they “pay” for their generosity by foregoing some spending the following January. At the margins, a statistically significant amount of activity is pulled forward a month.

After 2014, though, this predictable seasonality became even more pronounced (thus, the revolt). The reason was equally simple; people began to perceive the opposite of what they were being told by Economists. The economy and the labor market were slowing not accelerating. Residual seasonality became even more residual; one month of holiday pulled forward several months from the following year.

After many revisions, lo and behold current estimates for income growth do show what consumers were acting. Their caution and unease were very much reasonable; the income data very plainly illustrates an economy perched precariously close to a recession by late 2015.

It also shows there hasn’t been much if any recovery from that last downturn despite the passage of several years – and the constant, shrill shrieks of LABOR SHORTAGE!!! at every point along the way (until recently, that is).

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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