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Posts tagged with: "LNU01300000"

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Don’t be deceived by seasonality

In the graph above, the two series have the same label, yet they tell very different stories: The red line bounces between a few values, and the blue line shows a large increase last summer and then a decrease this winter. The difference is that the blue line reflects raw data, while the red line has been adjusted for seasonal regularities. Obviously, we need to take into account that the labor force participation rate increases every summer; only then can we correctly analyze how the economy is faring. Otherwise, one could draw false conclusions, especially by looking at a single year.

Expanding the sample period reveals the obvious seasonal variations in the path of the blue line, and the graph below shows this. (You can also use the slider bar under the graph above to achieve the same view.) Note, however, that these seasonal variations are not as strong as they used to be, presumably because the economy has become less sensitive to weather conditions.

How these graphs were created: Search for “Labor force participation,” select the two series you want, and click on “Add to Graph.” Limit the sample period to one year for the top graph and fully expand the sample period for the bottom graph.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CIVPART, LNU01300000

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