No shocks, just seasonally adjusted
For three months we have watched the Bureau of Statistics' seasonally adjusted figures zig and zag; this time they just stood still. At face value, they report poker-faced that we gained almost 30,000 jobs in February, lost 34,000 in March, gained 45,000 in April, then added just 1100 more in May.
Seasonally adjusted unemployment started the year at 5.4 per cent, climbed to 5.6 per cent in March and April, and is back at 5.5 per cent.
The markets took the figures as good news, if for no other reason than the financial forecasters had predicted they would be slightly worse. The dollar picked up immediately, then performed its own zigs and zags and finished the day more or less where it began.
Some commentators hailed the decline in seasonally adjusted unemployment from 5.6 per cent to 5.5 per cent as good news. They failed to note that April's 5.6 per cent had been revised up from 5.5, so there was no change.
In reality, the figures leave us where we thought we were: the economy moving ahead slowly, having slipped down into third gear as the mining boom in the west winds down.
They tell us nothing about what lies ahead. They offer no evidence that the economy is sliding into recession. They offer no evidence that it is springing into a new phase of growth.
The financial analysts keep focusing on the seasonally adjusted figures, perhaps out of habit, perhaps because the constant zigs and zags make them more fun, and more unpredictable, and hence increase the perceived value of having financial analysts.
The bureau tells us to ignore them. Most of that movement is just static, statistical noise that happens when the bureau tries to extrapolate a sample of 30,000 households to cover a nation of 23 million people. It urges us to focus on its trend figures, which give us the signal without the noise, smoothing out the zigs and zags into a gently curving path.
On the trend estimates, Australia is adding 10,000 jobs a month, and 151,000 in the past year. That might sound impressive, but for three details.
First, the growth is overwhelmingly in part-time jobs. Since December, the bureau estimates that Australia has added just 12,000 full-time jobs, and 67,000 part-time jobs. Full-time jobs are sliding in all the mining states: Queensland, WA and the Northern Territory.
Second, the trend unemployment rate is rising steadily: from 4.9 per cent in early 2011 to 5.1 per cent in May 2012, and 5.6 per cent in May 2013. Unemployment has risen by 63,000 in the past year, as even part-time jobs are not being created fast enough to keep up with the rising number seeking work.
Third, most of the jobless are not looking for work, but exiting to the sidelines. In the past year, the population aged 15 and over swelled by 336,000. But full-time jobs grew by just 64,000, and total employment by 151,000. With unemployment up 63,000, that means 122,000 people dropped out of the workforce.
Some were oldies who have retired willingly. Some are full-time students who in the past would have had a part-time job to help finance the lifestyle they desire. But many are just "hidden unemployed" - older people who would rather live in comfort on the disability benefit than in poverty on the dole, and others who have just stopped looking.
NSW now dominates the jobs growth. In trend terms, it has added 89,000 jobs in the past year, 54,000 of them full-time. Its unemployment rate has also edged up, to 5.5 per cent.
Victoria is recovering some of the jobs it had lost, but still has 11,000 fewer people in full-time work than in May 2011, despite having 157,000 more adults. Trend unemployment has edged down to 5.6 per cent.
The main trend in Queensland is for people to drop out; 61,000 have joined the sidelines in the past year, while just 12,000 jobs have been added, all part-time. Unemployment has fallen from 6.1 per cent in October to 5.7 per cent in May.
WA continues to slide from boom. Unemployment has grown by 20,000 in the past year, lifting it from 3.7 per cent to 5.1 per cent - still the lowest of any state, but probably not for much longer.
As in Victoria, South Australia is showing signs of new life. After two years with a dead jobs market, SA has added 10,000 full-time jobs in 2013, although unemployment has also risen to 5.9 per cent.
Tasmania continues shedding full-time jobs, but its trend unemployment rate has stabilised at 7.3 per cent, up from 5.2 per cent in mid-2011 and 4.0 per cent in mid-2008. NT unemployment has risen to 5.1 per cent (excluding community work schemes in Aboriginal settlements), but edged back down to 4.1 per cent in the ACT.
All in all, it's not terrible, it's not terrific. Even in Europe, with all its problems, Eurostat reports that in 2012, the southern German states of Bavaria and Baden-Wurttemberg, which have as many people as Australia, averaged an unemployment rate of 3.3 per cent. Now, that would be a gold medal performance - were it not that Norway averaged 3.1 per cent.
Frequently Asked Questions about this Article…
The seasonally adjusted series showed modest month-to-month swings: about +30,000 jobs in February, -34,000 in March, +45,000 in April and just +1,100 in May. Seasonally adjusted unemployment began the year at 5.4% , rose to 5.6% in March and April, and is back at 5.5% in May.
The Bureau of Statistics cautions that much of the month-to-month movement is statistical noise from extrapolating a sample of roughly 30,000 households to a nation of 23 million. Those seasonally adjusted 'zigs and zags' can be misleading, so the bureau recommends focusing on trend estimates that smooth out short-term volatility.
On trend, Australia is adding about 10,000 jobs a month and around 151,000 jobs in the past year. However, the trend unemployment rate has been rising — from 4.9% in early 2011 to 5.1% in May 2012 and 5.6% in May 2013 — with unemployment up by about 63,000 over the past year.
Most recent job growth has been in part‑time roles. Since December the bureau estimates only about 12,000 full‑time jobs were added versus roughly 67,000 part‑time jobs. For investors, stronger part‑time growth can signal weaker income growth and slower consumer spending than if full‑time employment were rising faster.
NSW dominates recent job growth, adding about 89,000 trend jobs in the past year (54,000 full‑time) with unemployment around 5.5%. Victoria is recovering but still has 11,000 fewer full‑time workers than in May 2011 and a 5.6% trend unemployment rate. Queensland shows people dropping out of the labour force (61,000) while adding only 12,000 part‑time jobs; its unemployment fell to 5.7% in May. WA has seen unemployment rise by about 20,000 (from 3.7% to 5.1%). South Australia added 10,000 full‑time jobs in 2013 but unemployment rose to 5.9%. Tasmania’s trend unemployment is about 7.3%; the NT is around 5.1% and the ACT about 4.1%.
Markets treated the figures as slightly better than feared: the Australian dollar initially picked up, then wandered back to roughly where it began. For everyday investors the takeaway is that the jobs data showed a slowly moving economy — not clear signs of recession or a new growth surge — so knee‑jerk market moves based on a single monthly print should be viewed cautiously.
The 'hidden unemployed' include people who have stopped looking for work, older people opting for early retirement or disability benefits, and some full‑time students who no longer take part‑time jobs. The report notes about 122,000 people effectively dropped out of the workforce in the past year, which understates labour market weakness if you only look at headline unemployment.
The Bureau recommends focusing on trend unemployment because it smooths out the statistical noise in the monthly seasonally adjusted series. For investors seeking a clearer signal about the economy, trend figures give a steadier view of labour market direction than the volatile month‑to‑month seasonally adjusted reads.
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