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April 2006, Vol. 129, No. 4
Seasonal adjustment in the ECI and the conversion to NAICS and SOC
E. Raphael Branch and Lowell Mason
Over the course of a year, rates of change in the cost of wages and benefits, as measured in the Employment Cost Index (ECI), reflect events that follow a more or less regular pattern. These events include expansions and contractions of economic activity that occur in specific periods of the year, such as increased work in the construction industry during warm weather and heightened activity associated with the beginning of the school year in the education industry. Such regular patterns in an economic time series are typically referred to as seasonal effects. The process of estimating and removing these effects from an economic series is called seasonal adjustment. Seasonal adjustment makes it easier for analysts to observe the longrun and other movements in an economic time series, exclusive of seasonal effects. Economists and other researchers are particularly interested in observing cyclical and longrun movements of economic series to better understand the economic behavior of various sectors of the economy.
The ECI is a time series—a quarterly fixed-weight index of changes in the cost of employment compensation—published since 1975.1 The ECI includes index and percent-change estimates for employer costs per hour worked, including the cost of total compensation, wages and salaries, and benefits. As a time series with repeated quarterly measurements, the ECI has been analyzed for seasonal adjustment, and seasonally adjusted ECI estimates are available from December 1990 onward, in addition to estimates that are not seasonally adjusted.
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1 For details on the development of X–12–ARIMA, see David F. Findley, Brian C. Monsell, William R. Bell, Mark C. Otto, and Bor-Chung Chen, "New Capabilities and Methods of the X–12–ARIMA Seasonal Adjustment Program," Journal of Business and Economic Statistics, April 1998; on the Internet at www.census.gov/srd/www/sapaper.html/.)
Related BLS programs
National Compensation Survey -- Compensation Cost Trends
Employment Cost Index: what is it?—Sept.
Introducing new weights for the Employment Cost Index.—Jun. 1985.
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