If the true rate is at 6.1% it puts into doubt any notion of price crashes or even a prolonged stagnation. Unemployment needs to be trending up and in the last 12 months it hasn't really done much other than hover.
I realise there's contention over the figures but they are not gong to be to far off and I base this off real world results. If unemployment is picking up and is trending up on s consistent bases then things tend to go real bad real quickly and that is just not happening. Anecdotal but I haven't spoken to anyone recently, not personally or professionally, who have concerns over the economy or their own financial standing now or even into the near future.
No even has a true or real belief we are anything other than wealthy and prosperous as a nation. This sort of sentiment doesn't come in an environment of high or progressively higher unemployment rates.
Depends who you ask. Try asking our youth at large, that is where the burden of the slowdown has largely landed. It's not an actual recession so if you already have a job you are probably still ok (but look out if you're in or attached to mining). But if you are out looking for your first job the situation is somewhat grimmer than it has been.
Inadequate resourcing at the Australian Bureau of Statistics has forced it to fudge the jobs data, which is our most important monthly release. While this has seriously undermined confidence in the Australian government’s reporting, the latest labour market print has not altered our view of where the economy is heading.
That was certainly the financial markets’ reaction: after an immediate dip in the Aussie dollar and drop in bond yields, traders had within 30 minutes left both key instruments unchanged from their levels before the release at 11.30am.
Let me explain why.
What financial markets and the Reserve Bank of Australia are really focused on is obviously what the jobs data means for the setting of interest rates.
The reason the monthly jobless data are important is because the RBA believes the unemployment rate is the single most powerful predictor of inflation and spare capacity in the economy.
And as an inflation-targeting central bank, it is changes in the quarterly core consumer price index that exercise the heaviest influence over what the RBA does with its target cash rate. Ipso facto, traders concentrate on the monthly jobs release.
The brighter interest rate strategists know to effectively ignore the highly variable absolute employment growth numbers reported each month, which are published with enormously wide standard errors that make them practically meaningless.
The absolute key for investors punting on the currency and listed interest rate future securities, and for the RBA, is the unemployment rate, which is a far more stable variable.
So here’s the crux of the ABS drama.
In the month of September it found that there was a 29,700 reduction in the raw number of total employed persons.
If it had “seasonally-adjusted” this number, which is just a smoothing technique, to reflect the “normal” seasonal pattern of employment in September, the result would have been a huge 172,000 fall in total employed persons.
This would have been wonderful for selling newspapers and scaring the life out of mums and dads.
But the rub is that the much more important seasonally-adjusted unemployment rate in September would have been completely unchanged from its previous August estimate of 6.1 per cent.
That is, the jobless rate would not have increased despite the scary sounding fall in total employment.
This is because in seasonally-adjusted terms the number of unemployed people in September would have actually declined by 7,000 workers due to a fall in the participation rate, which measures how many of us are actually looking for work.
In order to avoid the sticker-fright associated with the seasonally-adjusted employment (as opposed to jobless rate) numbers, the ABS has dropped its entire seasonal-adjustment process and is currently just reporting the raw numbers.
The impact of this is that the jobless rate in raw terms was actually 6 per cent over July and August and 6.1 per cent September.
Yes but the thread was originally about the labour force data and it is that to which I am referring.
I love how single minded these people are about their houses, all the news, everything, it's all about their houses.
Despite a large portion of the economy not having anything to do with houses at all.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
That's its main focus, yes, I agree. Doesn't mean we can't discuss thing with other foci though.
This constant need to bring everything said into the 'property' umbrella some people here seem to exhibit is odd to me, surely they don't go around all day thinking and talking property, surely they have other interests.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
To state that the ABS’s recent data problems are embarrassing is a fairly serious understatement. It’s not that the previously reported spike in employment should have been taken as truth. As I noted at the time it should have been taken with a grain of salt (A dose of reality with the jobs data, September 12). But then, so should every month’s result -- August wasn’t an exception.
The bigger problem is that the veracity of the ABS’s entire methodology, their competence, has now been brought into question. Can Australians rely on the figures the Bureau produces? Clearly we cannot. The labour market has gone from looking quite healthy, to now looking quite weak -- in one month. Noting this, it would be unreasonable to suggest that such errors are isolated to the labour force survey alone. What’s to say, for instance, that the seasonal factors applied to the national accounts aren’t wrong as well? Or the monthly retail sales survey? You don’t need errors of the magnitude that we’ve seen in these recent employment results to produce an entirely different economy.
As one, not so small example, the seasonally adjusted (real) measure of consumer spending shows consumption rising only 0.5 per cent per quarter, on average, over the last couple of years. That annualises to about 2 per cent -- a pace well below trend and clearly soft. On the original figures, however, that jumps to 0.8 per cent per quarter. It’s an average growth rate over two years, so no seasonality should be present. Yet on this basis, consumer spending is in line with normal growth. All of a sudden consumers aren’t so cautious. Economic growth more broadly has been running at an above-trend pace on the original figures -- a brighter picture than has been painted at times.
Don’t get me wrong. Seasonally adjusting data makes sense. Yet it clearly is more art than science and highly subjective. In a way, I guess that’s the big positive out of this debacle. It highlights the simple fact that even the most robust statistics are, ultimately, subjective. A work of fiction even.
Noting this, it should be the aim of statisticians to reduce to the subjectivity of the data, not increase it -- which is why the ABS decision to apply seasonal factors randomly is simply unacceptable. The issue isn’t whether the data is volatile or that we get rogue results. It is and we do. The decision would, however, introduce much more uncertainty than currently exists.
Citizens, business and market participants would be far less certain, at any given time, of the extent to which bias has been introduced into the figures. That this occurs anyway I don’t doubt -- even subconsciously -- and small changes to seasonal factors can produce an entirely different economic picture. Indeed, I recall a conversation I had some years ago with an ABS employee: Having questioned some data the reply came “don’t you read the papers?” Only one employee, sure, and a person who may not even work there anymore. Yet that conversation highlights a point. Statisticians are people too -- and the media is all-powerful!
Having been bruised, battered and humiliated beyond question, the risk is that this bias becomes amplified. The ABS is going to want to fly under the radar for a while which means producing figures that don’t stir up much controversy. A policy of no surprises. This makes the ABS a little more amenable in producing statistics that simply reflect the current consensus (of weakness). I’m not suggesting this would be a deliberate policy, but the impulse would be hard to resist -- and as we know, applying seasonal factors is artful at best.
So how healthy is the economy? Increasingly it’s whatever you think -- literally. For what it’s worth, and I realise it’s probably not much given the incredibly low quality of the data, I still think the labour market shows quite healthy outcomes. Dismiss these last two results -- original or otherwise. The pattern in place, prior to these months, was that jobs growth had picked up markedly (from flat growth last year to 17,000 on average this year). I see no reason for that to have changed. Economic growth is above trend and momentum is accelerating. At least it was, we’ll see what pressure the ABS comes under. Housing construction is otherwise surging and that sector is a big employer. Finally, the unemployment rate has been constant at 5.9 per cent. All up not a bad set of metrics.
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