Spring is supposed to be the season of renewal, not just in nature but for many businesses. That will make the blow to the economy from the novel coronavirus crisis even heavier.
Economic data often give the impression that U.S. business is a steadily moving thing, but that isn’t entirely the case. Rather, different parts of the economy wax and wane in a regular way throughout the year. During the holiday shopping period in November and December, for example, retailers register a jump in sales. The government and other data providers use statistical methods to seasonally adjust for such swings and better capture the economy’s underlying trend.
Take away those seasonal adjustments and the second quarter, more than any other time, is when the economy really surges. Consider real estate, where the spring selling season would now typically be under way. In the second quarter of last year, the National Association of Realtors’ pending home-sales index, which is based on when home sales go into contract, was on average 2.6% higher in the second quarter than in the first on a seasonally adjusted basis. But take away that seasonal adjustment and it was 32% higher.
Similarly, the second quarter is when spending on construction surges as work on building everything from houses to bridges picks up. Construction spending in the second quarter of last year was flat on a seasonally adjusted basis with the first quarter, according to the Commerce Department, but without that adjustment it was up 20%. There also is a great deal of seasonal job growth in the second quarter, including workers who get hired on for summer work such as line cooks in beach town restaurants and housekeepers in resort hotels. From March to June of last year, the leisure-and-hospitality industry added 30,000 jobs on a seasonally adjusted basis, according to the Labor Department, but 1.13 million without seasonal adjustment.
It all adds up to a lot. Without seasonal adjustment, gross domestic product grew at a 13.6% annual rate in the second quarter of last year, according to the Commerce Department, which compares with a seasonally adjusted 2%.
It might be tempting to look at incoming data on a not-seasonally-adjusted basis and conclude that the reality isn’t as bad as advertised. When in July the Commerce Department reports that GDP contracted massively, for example, one might think it wasn’t as bad as it might have been. But that would be getting it wrong because the absence of activity that usually occurs in the second quarter will cause a lot of damage.
That will be particularly true for those businesses and workers that depend on the second-quarter surge. For some of them, it is a period that can make or break the year. For some of them, even in a best-case scenario, in which the virus has been contained by the start of the summer and the economy starts to regain its footing, the lost season could mean losing everything.
Write to Justin Lahart at justin.lahart@wsj.com
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