More pain ahead for Australian policymakers and companies who depend on the accuracy and credibility of the monthly jobless data from the Australian Bureau of Statistics.
The ABS said users will have to hang on for a while yet while it tries to sort out the mess the Labour Force data has become mired in with hard to believe seasonal adjustment factors and reworked (and problematic) data questionnaires and collection.
That means several more months of having to reply on unadjusted data which will become meaningless as Christmas approaches and schools and universities, sending tens of thousands of people onto the jobs market and unemployment rolls. But early next year, the jobs data will be all but useless for policymakers unless the mess is sorted out ASAP.
The ABS explained yesterday (repeating what it said in a statement on Wednesday) that it had:
“…concluded that the seasonal pattern previously evident for the July, August and September labour force estimates is not apparent in 2014. This assessment was made while preparing labour force estimates for September 2014 and relates to all seasonally adjusted labour force estimates other than the aggregate monthly hours worked series. As there is little evidence of seasonality in the July, August and September months for 2014, the ABS has decided that for these months the seasonal factors will be set to one (reflecting no seasonality).”
And we now know what triggered this questioning – an incredible fall of 172,000 people in the number of people employed in September. After the shock 121,000 rise in the number of new jobs in August, the September figure was just too much – so the ABS called a halt and will now try and find out what went wrong with the most important figures for the economy.
That staggering fall in employment of 172,000 would have seen record fall of a full percentage point in the participation rate – but curiously the net result would have still been 6.1% unemployment (the same as the raw, unadjusted figures).
As the ABS said:
”The movements between July and August 2014 for the seasonally adjusted Australian employment series, especially part-time employment, were very large but again were not unprecedented. However, if the previously observed seasonal factors had been applied to September, there would have been an unprecedented movement in full-time employment. Cumulative evidence from these three months identified that maintaining the standard approach was not appropriate.”
So now it’s hold on for a few more months until a review is held and the mess is hopefully sorted out to everyone’s satisfaction.
“The ABS will… initiate a review into the series to better understand why the series appear to have shifted away from their usual seasonal patterns. Although estimates for October have not traditionally exhibited strong seasonality (and therefore have seasonal factors close to one), it is not ideal to maintain the current treatment for an extended period. The treatment in October and future months will depend on the estimates produced, the continuation of the current investigations and the outcome of the review.”
And what did the raw data for September reveal yesterday? Well in July and August (the months for which the previous adjusted figures were unadjusted to the raw state) showed unemployment has been steady at 6% for July and August but rose to 6.1% last month, thanks to a fall of nearly 30,000 jobs and an 0.2% fall in the participation rate.
In trend terms, unemployment remains at 6% and participation is unchanged.
So no real excitement. The dollar fell half a cent after the ABS data release happened at 11.30 am, but that was just a bunch of silly people who didn’t understand what was being reported.
The currency quickly made up the losses. Yields on government bonds also rose, then eased back to pre-release levels.
The jobless data, especially the unemployment rate, remains the most important figures for markets, investors, home owners, you name it.
The RBA sees the unemployment rate as the best predictor of inflation and spare capacity in the economy.
At the moment it is telling the bank there is a fair bit of both. The continuing fall in real wages is adding to that belief and is being driven by the sluggish jobs market.
The quarterly consumer price index is vital for the bank in terms of its inflation targetting, but that figure is too slow to emerge (it’s why the RBA wanted the ABS to move to a monthly CPI series, but the bureau wouldn’t because it had no money).
The actual jobs data is regarded with a grain of salt because of the month to month volatility in the seasonally adjusted figures.
The actual unemployment rate is a more stable indicator (the banks and others use the trend series to remove the volatility from the seasonally adjusted series) for the RBA and other policymakers, but the granular detail on jobless figures, hours worked and full and part time employment help flesh out the picture for the RBA.
That won’t happen with any certainty for some months to come.
