From Roy Morgan this afternoon and presented without comment:
Yesterday’s ABS unemployment estimates (showing January unemployment dropping to 5.1%) defy belief — and common sense. The constant stream of companies announcing retrenchments in the early stages of 2012 are a clear sign that the ABS figures are diverging from reality.
Roy Morgan’s unemployment estimate (10.3%, up 1.7% in January — released on February 3, 2012) provides a more accurate picture of what is happening on the ground in the Australian economy — and more importantly — what is happening NOW!
The key differences are outlined in this note (reproduced below*) we include in each of our monthly Roy Morgan unemployment releases. Most specifically, the third and fourth paragraphs in, namely: The ABS only classifies an unemployed person as part of the labour force if, when surveyed, they have been actively looking for work in the four weeks up to the end of the reference week and if they were available for work in the reference week.
This creates a natural lag on the ABS estimates whereas the Roy Morgan estimates are taken at that point in time. If the respondent is out of work and looking for work — we classify them as unemployed.
The ABS also uses a seasonal adjustment process to determine their final figure. In January this would have a larger than usual downward effect. Roy Morgan estimates show unemployment in January rising 9/11 years going back to the turn of the century. So ‘on the ground’ more people are looking for work after New Year than before — hardly surprising. The ABS seasonal adjustment process no doubt takes this “static” (school leavers, recent uni grads etc.) out of the picture — and there is no doubt it brings the ABS number down each January.
As mentioned before though — one of the key differences between the ABS estimates and the Roy Morgan estimates is the immediacy of the figures. Roy Morgan estimates are immediate, whereas to show up as unemployed in the ABS figures you may have lost your job in November or December last year. The ABS unemployment estimates constitute a ‘lagging’ indicator.
The Roy Morgan Unemployment estimate is obtained by surveying an Australia-wide cross section with face-to-face interviews. An unemployed person is classified as part of the labour force if they are looking for work, no matter when. The results are not seasonally adjusted and provide an accurate measure of monthly unemployment estimates in Australia.
The Australian Bureau of Statistics Unemployment estimates are obtained by mostly telephone interviews. Households selected for the ABS Survey are interviewed each month for eight months, with one-eighth of the sample being replaced each month. The first interview is conducted face-to-face. Subsequent interviews are then conducted by telephone.
The ABS classifies an unemployed person as part of the labour force only if, when surveyed, they have been actively looking for work in the four weeks up to the end of the reference week and if they were available for work in the reference week.
The Australian Bureau of Statistics Unemployment estimates are also seasonally adjusted.
For these reasons the Australian Bureau of Statistics Unemployment estimates are different from the Roy Morgan Unemployment estimate.