Weather-Adjusting Employment Data

Abstract

First version: December 18, 2014. This version: January 12, 2015. This paper proposes and implements a statistical methodology for adjusting employment data for the effects of deviation in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. Unusual weather can distort both the data and the seasonal factors. We control for both of these effects by integrating a weather adjustment step in the seasonal adjustment process. We use several indicators of weather, including temperature, snowfall and hurricanes. Weather effects can be very important, shifting the monthly payrolls change number by more than 100,000 in either direction. The effects are largest in the winter and early spring months and in the construction sector.

Keywords: Weather, employment data, seasonal adjustment, MIDAS

JEL Classification: C22, C80