Trend figures paint a bleaker jobs picture
Not exactly. The same Bureau of Statistics figures tell us that after seasonal adjustment, July also saw 10,200 fewer people employed. Full-time work fell by 6800. So times are both bad and good?
The first step to understanding what is going on is to forget about seasonally adjusted figures. The bureau has warned us that its margin for error is too large to give any reliable guide to month-by-month movements.
But economists keep ignoring it, and my guess is it's because they like the colour and movement the unreliable figures provide.
Perhaps the bureau should put its estimates of the standard error on page 1 of its labour force figures, to get the message out. On page 34, it tells us that it is 95 per cent confident that the monthly movement in jobs in July was somewhere between plus-20,000 and minus-41,000. They are confident that unemployment moved by something between plus-14,000 and minus-25,000.
Does anyone find that helpful? No, so let's discard the seasonally adjusted figures and move to the figures the bureau wants us to focus on: its trend estimates. What the trend figures tell us is this. In the six months to July:
■ The number of Australians aged 15 and over grew by 171,000.
■ The number of them with a job grew by 53,000.
■ The number with a full-time job grew by 700.
■ The number who are unemployed grew by 42,000.
■ The number who are retired, studying, looking after children or, for whatever reason, neither in a job nor looking for one, grew by 76,000.
■ The average working hours of those in jobs grew from 140.3 hours a month to 140.9 hours, making up some of the ground lost in 2012.
■ Twenty-five per cent of teenagers who want a full-time job are unemployed.
Joe Hockey says the Reserve Bank cut interest rates on Tuesday because the economy is weak. These figures suggest Joe is right.
The economy is not generating jobs at anything like the pace needed to keep up with the growth in the adult population. The jobs market is weak, and getting weaker.
By July, the bureau estimates that total growth in jobs has shrunk to 1000 a month, with full-time jobs shrinking by 1700 a month.
The trend unemployment rate nationally is 5.7 per cent, the same as the seasonally adjusted rate.
Frequently Asked Questions about this Article…
Seasonally adjusted figures try to remove predictable seasonal effects to show month‑to‑month changes, but the ABS warns their margin of error is large for single months. Trend estimates smooth monthly volatility to show the underlying direction of the labour market, and the article says investors should focus on the ABS trend numbers rather than noisy seasonal monthly moves.
The July seasonally adjusted figures showed 5,700 fewer people unemployed but also 10,200 fewer people employed and a 6,800 fall in full‑time work. The ABS itself reports a wide confidence interval — for example monthly job moves could plausibly be between +20,000 and −41,000 — so the article argues those single‑month seasonal numbers can be unreliable.
According to the ABS trend estimates quoted in the article, in the six months to July the Australian population aged 15+ grew by 171,000, total people with a job grew by 53,000, full‑time jobs grew by 700, unemployed people grew by 42,000, and those not in the labour force grew by 76,000. Average working hours for people in jobs rose from 140.3 to 140.9 hours a month.
A trend unemployment rate of 5.7% (the same as the seasonally adjusted rate in July) signals a relatively weak jobs market in the article. For investors, weaker employment can mean softer consumer spending, slower revenue growth for some companies and influence on monetary policy decisions such as interest‑rate cuts.
The article notes that 25% of teenagers who want a full‑time job are unemployed. High youth unemployment can indicate structural weakness in the labour market, reduce future household income growth and have longer‑term implications for consumer demand that investors tracking domestic consumption should be aware of.
The article cites Joe Hockey’s comment that the Reserve Bank cut interest rates because the economy is weak, and says the ABS trend figures support that view — the economy isn’t creating enough jobs to keep up with adult population growth, suggesting labour‑market weakness that can justify a rate cut.
Average working hours for people in jobs rose from 140.3 to 140.9 hours a month, which helped recover some ground lost earlier. The article implies this gain in hours partially offsets weak headcount job growth, meaning firms may be using longer hours for existing staff rather than hiring many new full‑time workers.
The article recommends investors focus on the ABS trend estimates rather than single‑month seasonally adjusted movements because the latter have a large margin of error and can be misleading. Trend figures give a clearer picture of the underlying direction of the jobs market.
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