DEEWR publishes a monthly leading indicator of employment trends which has a decent forecasting record. It rose today for the sixth month in a row:
Here’s what DEEWR says:
DEEWR’s Monthly Leading Indicator of Employment (Indicator) has risen for the sixth consecutive month in January 2013, after falling for seven consecutive months previously. A quickening in the pace of employment growth to above its long-term trend rate of 1.6 per cent per annum is now technically in prospect, because the Indicator has risen for the minimum of six consecutive months required to confirm that the indicator reached a trough in July 2012. However the Indicator seems to be decelerating. Cyclical employment has fallen for seven consecutive months since June 2012.
Hmmm, well, it’s possible. There were hints in the last ANZ job series release that WA and QLD job shedding had eased. I still agree with consensus, however, that unemployment is likely to rise this year toward 6%, though it might take until next year. The internals of the DEEWR indicator are as follows:
We can pinpoint at least some distortion here in the use of Westpac’s terrible leading indicator which has failed to predict the sun rising for the past two years owing to its dated biases towards the US economy. There is also the use of the consumer confidence measure which, given growth has not been driven much by consumers, will be giving a false positive.
I do not know what the forecasting record for the Dun and Bradstreet measure is.
In conclusion, there are some reasons to argue that the DEEWR indicator may have lost its way in this atypical cycle as other marginal indicators suggest. But I wouldn’t bet my life on it, especially since the the official unemployment number has a habit of falling on a declining participation rate.
I find this hard to swallow especially when I see articles like the Boral one poster earlier and this.
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CRAZY JOHN’S to close / 300 jobs to go!
http://www.theage.com.au/business/vodafone-disconnects-crazy-johns-saddening-widow-20130116-2cs1w.html
Why do you put so much faith into MSM reporting of 1,000 lost jobs in forecasting the UE rate in a 12 million person labour force?
Surely the robustness of the labour market to date is a pretty good indication that these type of job loss announcements are pretty poor indicators of the overall market.
I’m with you bellyboy
Robust labour market, record new car sales, soaring iron ore price. Certainly no basis to cut rates further.
Unemployment results have certainly surprised of late, but they can’t surprise forever….
Much like the bogus car sales stats, I dont trust the unemployment rate as far as I could throw it.
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New job advertising is through the floor and there have been numerous business closures and job losses and yet miraculously the UE rate remains unaffected or indeed improves.
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Governments do amazing things to maintain order and pull the wool over the eyes of the populus all in the name of keeping order! That includes the fudging, tweaking, adjusting, massaging of any figure they see fit.
By all means though, if by way of fudging the UE figures it justifies a rate rise, then I am for it.
Put less faith in DEEWR than the MSM.
I have a theory we wont see as big as expected rise in Unemployment on Thursday. I think we will see a continued decline in the participation rate over the next 2-3 months as the baby boomers retire and leave the work force for good.
I’m basing this mostly on anecdotal evidence however it will be interesting to see how this plays out in reality.
Interesting anecdote, and I think you could be onto something.
Labour market is pretty tough at the moment, and when you’re over 50 it can be mighty hard to get work when your competition are 20, 30, 40 year olds…
Booming car sales and raining jobs.
Alan Kohler will be on fire tonight.
Car sales are through the roof because the car manufacturers have sliced the financing cost to next to, if not, zero. The numbers aren’t reflective of historical patterns, not in this “new normal” economy of ever cheaper central bank credit. Add that to the government’s accelerated tax depreciation for business vehicles and what do you expect?
Except it can’t keep going on like this…and reversion to the mean will happen and things will get ugly
I have a theory which I wont name yet but thus far the data is consistent that gives me a testable prediction that suggests the Seasonally Adjusted rate of unemployment currently at 5.2% will rise tomorrow on data release. I have no idea what it will rise to(I could only speculate) and I know trend is a better figure to use but my theory doesn’t look at that since the headline figure often given is the Seasonally Adjusted figure.
DEEWR’s forecasts of the past six months have borne scant resembalence to what has actually occured on the job creation front.
Guess it depends on what the lead is on the leading indicator … do we have any idea ?
Three of the four components were positve. I may be off the mark but it looks like the three that were positive in % change over the month (employment expectations,leading index of economic activity and an index of consumer sentiment)are somewhat abstract by comparison to the one component that was negative – actual job ads.
Looking at the Engineering construction pipeline and work done in the last 12 months it seems there is 4 years work at 2012 rates of work, say 3 years to allow for some deferments and cancellations.
I won’t be surprised if unemployment doesn’t start to fall by end Q1 13 as interest rate cuts start to increase consumer spending. First Home Buyer Grants limited to new construction might also have started lifting dwelling construction by then too.