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Seasonal Adjustments

Before most economic indicators are released, they are calculated to reflect seasonal adjustments. What are seasonal adjustments? The simplest way to answer this question is with an example. It's no surprise that consumers do a lot more shopping during the November/December holiday period than at other times of the year. In addition, when the Christmas shopping season is over, retail sales often slow in January and February. These seasonal shifts in consumer spending patterns are quite common. They're temporary changes that have nothing to do with the business cycle.

Let's look at another example. In the spring when schools close, the number of people getting jobs surges as students enter the workforce to earn money over the summer. By mid-August, the process is reversed and employment drops off as students leave the workforce and return to school. Again, these fluctuations in employment are perfectly normal and are not indicative of a fundamental change in the economy's health. Even industrial production tends to fall in July as automakers shut down plants that month to retool their assembly lines for the new model year. No one should conclude this slowdown in industrial output means that the manufacturing sector is in trouble. These are all routine seasonal shifts that take place in the economy.


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