The December jobs number was a fairly pivotal report. It’s a game-changer, as it shows the nation enjoyed the strongest jobs growth on record in three months to December. In fact, 188,000 jobs were created over that period (original terms), which compares to more ‘normal’ jobs growth of about 90,000 (10-year trend over that period).
That’s a fantastic outcome, yet somehow the Australian Bureau of Statistics reckons this equates to jobs growth of about 100,000 when you adjust for seasonality. That’s still strong — the best result in about a decade — but it’s not that much above ‘normal’. That’s a problem given the unadjusted numbers suggest jobs growth was well and truly above normal. It looks like the ABS is still working to soften the numbers to make them more palatable, when the seasonal adjustments should in fact be working the other way.
On a more positive note, this latest labour force print does correct in part, for obvious seasonal adjustment errors, on the unemployment rate. There is still some way to go.
For instance, the decline in the unemployment rate from an unbelievably high 6.3 per cent, now looks a little more realistic at 6.1 per cent. Yet that is still above what the unadjusted numbers tell us at 5.9 per cent.
On the unadjusted figures, the unemployment rate has been broadly steady at around 5.9 per cent since April 2014. So we can’t say the difference between the original figures and the adjusted figures is seasonality. The nine months it’s been steady shows that it clearly isn’t. It is more likely a measurement error. In any case, in unadjusted terms, this is the first December we haven’t seen a spike in the unemployment rate since 2010. Prior to that you have to go back to 1998.
So realistically (and if you want to talk seasonality) the unemployment rate must be closer 5.7 per cent, or even lower when you plug in the correct seasonal factors for employment growth.
The reputation of the ABS was dealt a mortal blow last year following problems with the labour force survey. Investors need to keep that in mind when we interpret these latest results. The truth is, the numbers confirm the underlying economy is growing at a solid clip.
This news story is reprinted from www.businessspectator.com.au
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