The business press has gotten really excited about the possibility — some of them are even treating it as a probability — that the first-quarter's recently reported annualized economic contraction of 0.7 percent will go positive if it gets revised for so-called "residual seasonality."
"Residual seasonality" is "the manifestation of seasonal patterns in data that have already been seasonally adjusted." (Supposedly, the way to fix this is add more "seasoning.") On April 22, CNBC's Steve Liesman contended that it's been a chronic 30-year problem. As far as I can tell, no one in the press has followed up on that claim. If they had, they would have found that it has not been a 30-year "problem," and that it's a "problem" remarkably unique to the presence of Democratic Party presidential administrations and policies:
There was virtually no net first-quarter GDP underperformance from 1985-1992, i.e., the first eight of the 30 years Liesman claimed the trend has been present. He certainly should not have included those years, which "just so happen" to have had GOP presidential administrations (Ronald Reagan from 1985-1988 and Bush 41 from 1989-1992).
After that, readers will plainly see that the vast majority of the net GDP underperformance has occurred during Democrtatic presidential administrations. Bill Clinton's years showed a net 10.6-point underperformance, while Barack Obama (from 2009-2014) has given us 10.5 points. I also included the 2.4-point underperformance in 2008 in the blue total because Keynesian stimulus began to be applied early that year, and because Democratic Party intentions to choke the economy by stymieing energy development had become quite obvious. The net first-quarter underperformance during the remaining seven Bush 43 years of 2001-1007 was also negligible.
This means, as seen above, that 96 percent of the net first-quarter GDP underperformance (23.5 points out of the total of 24.4) occurred Democrat presidential administrations or while Democrat policies held sway. Even if you (incorrectly, in my opinion) assign 2008 to the Republicans, the underperformance weighting is still 21.1 points for Democrats (86.5%) and 3.3 points for Republicans (13.5%).
As I noted in a column posted at PJ Media this weekend, the business press, pundits, and their go-to economists have gone gaga over "residual seasonality" (bold is mine):
Residual seasonality’s unconfirmed existence hasn’t stopped it from becoming the excuse du jour in the business press. The Associated Press, Bloomberg and Reuters all included it in their roster of potential rationalizations for last Friday’s reported contraction. Bloomberg went so far as to claim that it “probably distorted the data.” On his June 3 conference call discussing ADP’s private-sector payroll report, Moody’s economist Mark Zandi said that he believes that “there’s something to that.”
Zandi is right, in a sense. "Something" has been going on. Absent spectacular and compelling evidence to the contrary, we can be quite confident that it involves the following (again quoting from my weekend column):
- Far more than Republicans, Democratic administrations have imposed new taxes. These have largely gone into effect at the beginning of each calendar year, dampening first-quarter economic activity.
- Far more than Republicans, Democratic administrations have imposed new regulations on businesses, entrepreneurs and investors. These have also largely taken effect at the beginning of each calendar year, also impeding economic activity.
In subsequent quarters, the economy adjusts. But as we have seen in recent years, the adjustments have usually been to a level of unprecedented annual mediocrity.
It seems more than a little suspicious that CNBC's Liesman, supposedly independently and without any form of outside influence, came up with all of this on his own, in the processs choosing a clearly misleading 30-year time frame for his analysis while ignoring the obvious "blue year" bunching of the variances.
Lo and behold, the governmnt's Bureau of Econonic Analysis, after a short-lived "no comment," told Liesman — wonder of wonders — they were already working on the "problem," which could conveniently lead to upward revisions to first-quarter GDP not only this year, but for several preceding years. All of this looks more than a little orchestrated.
What the people who are making claims of "residual seasonality" are really trying to do is falsely “seasonalize” away the visible results of the left’s misguided policies, particularly those seen under Obamanomics — and the press is eagerly letting them.
Cross-posted at BizzyBlog.com.