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Employment averaging out softly

Employment continues to rise slowly - and so does unemployment.

Employment continues to rise slowly - and so does unemployment. Photo: Louie Douvis

What’s the main lesson from the February and March labour market statistics? That individual monthly seasonally adjusted numbers jump around too much to be taken very seriously.

That’s why the Australian Bureau of Statistics publishes the trend series at the top of the page and the seasonally adjusted bungee numbers below it.

Nevertheless, the seasonally adjusted numbers make much better headlines and give market economists more to talk about. February: surprise jump in jobs. March: surprise slump in jobs. And so on.

Except that the slump reported today is not a surprise. Nobody, not even Wayne Swan or Joe Hockey, believed February’s alleged 71,500 surge in employment. Everybody expected some retracement in today’s numbers but the commentariat was too timid on the scale, the average guess being the loss of just 7500 jobs.

As it turns out, March’s 25,900 drop in seasonally adjusted employed is hardly surprising after the February rocket. Similarly, the drop 5 million hours worked in March sounds a little frightening – but that’s after reported jump of 11.3 million hours in February.

Thus picking employment number movements to the nearest 10,000 remains one of the least successful things to attempt with crystal ball, tea leaves or job ad surveys.*

The not-surprising real story is in the darker trend line of the graphs accompanying Glenda Kwek’s report, not the volatile seasonally adjusted shadow: Employment continues to rise slowly and so does unemployment, as predicted by the Reserve Bank and Treasury.

The current 5.5 per cent unemployment rate (trend series, of course) is what the official family guessed it would be at by the middle of this year. So, of itself, that rate should not frighten the horses.

It’s the expectation of such a rate that has monetary policy loose and staying loose for as long as anyone can usefully imagine. It’s why the “rate rise for Christmas” story is unlikely to be true.

The labour market is soft and it’s staying soft. The official family continues to bet on low interest rates eventually stimulating consumers and housing builders a bit more to pick up some of the growth slack as the construction phase of the resources boom first plateaus and then eases. A soft labour market prevents inflation taking hold and makes the aforementioned low interest rates possible.

The RBA has been looking, somewhat wistfully, at the indications of lower rates starting to work. Retail sales have improved for January and February and, anecdotally, March seems to have been all right as well. Motor vehicles sales continue at record rates. Building approvals figures have mostly been rising, even though new housing completions have not.

Business conditions, as reported by NAB, are poor but business confidence about the outlook is up. Consumer confidence, well, that’s another story that seems overwhelmingly political.

The downturn in capital investment outside the resources industry remains a worry, something that will keep the labour market weak. But a fair reading of the present numbers doesn’t point to an employment cliff that might scare consumers into their shell – unless you work really hard at it.

* For all those who got it wrong today, RBA governor Glenn Stevens made the defence case for economic forecasting in a footnote to yesterday’s speech:

“In aviation and, I imagine, in sailing, a good weather forecast is invaluable. My observation is that those weather forecasts are actually pretty good. Unfortunately, the same cannot be said for forecasts in economics and finance. This doesn't mean we don't set out on the journey – we have no choice – but it means we should do so with due care.”

Michael Pascoe is a BusinessDay contributing editor.

30 comments so far

  • So does this mean that the Labor hacks will be on the news tonight talking about the sharp drop in employment? Lets face it they were crowing about their awesomeness when the last lot of figures were announced. Every thinking person knew it wasnt real but that didnt stop the Labor BS machine. I am guessing that tonight labor will announce another one of their fictional coalition policies to deflect away from the stats.

    Commenter
    Enough Already
    Location
    Peth
    Date and time
    April 11, 2013, 2:25PM
    • Enough Already,
      Please provide valid quotes or references to Labor Politicians "crowing about their awesomeness".
      They may have commented on the figures but i don't recall your version of events.

      Commenter
      Econorat
      Location
      Sydney
      Date and time
      April 11, 2013, 3:56PM
    • No, because as you Liberal Stooge nutjobs claimed last time (when the numbers were good) these figures from the ABS are incorrect. What would they know!!! It's all rubbish. blah blah blah

      Commenter
      TommyP
      Date and time
      April 11, 2013, 4:01PM
    • The carbon tax is finally having it's intended impact.

      Econorat - anytime Swan opens his mouth is an example.

      Commenter
      Hacka
      Location
      Canberra
      Date and time
      April 11, 2013, 4:33PM
    • Actually Tommy P it was the ABS itself that said the number of jobs created in February was unrealistically high and was due to changes in the survey process. This has been vindicated by the very sharp drop in March The ABS reckons jobs are growing on average at about 13000 per month which is not enough to stop unemployment rising, as it has done for the last 12 months. And econorat, if you can't remember Gillard and Swan skiting about the jobs figures in February, you must have short term memory loss

      Commenter
      Ian
      Location
      Frematle
      Date and time
      April 11, 2013, 4:50PM
    • Hacka,

      You are being hysterical, whilst it is aweful that some (approx 36000) lost their jobs you forget that 71000 gained jobs the month before

      Commenter
      Buffalo Bill
      Location
      Sydneys Northshore
      Date and time
      April 11, 2013, 5:01PM
    • And Buffalo Bill you may remember Swan crowing about his awesomeness at the time too.

      Commenter
      Hacka
      Date and time
      April 11, 2013, 9:16PM
    • Hacka,
      What has that quote got to do with unemployment figures?
      and.... if power stations have reduced CO2 emissions by 8% since 1 July, how is the Carbon tax not having an effect; given power generators are our biggest emitters of CO2
      You are way off topic.

      Commenter
      Econorat
      Location
      Sydney
      Date and time
      April 12, 2013, 6:06AM
    • Ian,
      I don't know about 'skiting', perhaps you could provide a quote for us.
      Perhaps they were 'pleased' with the results, as any politician would be.
      i find any comments about how politicians are 'crowing about their awesomeness' to be one-sided opinions.
      The average politican has a right to be 'pleased' on some figures but to then declare that they are crowing about something only indicates the biasedness of the writer. Or don't you recall JWH or Costello 'crowing about their awesomeness' on how good interest rates were under a LNP government.

      Commenter
      Econorat
      Location
      Sydney
      Date and time
      April 12, 2013, 6:12AM
  • It may be my dodgy memory but Gillard and Swan took almost total credit for the February job figures. And they seem to be very quiet today.

    Commenter
    Fred
    Location
    Sydney
    Date and time
    April 11, 2013, 2:40PM

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