Bill Evans unpacks the participation rate

Bill Evans joins the employment skeptics.

Westpac first impressions: August Labour Force Survey

Employment –8.8k in August (WBC –5k; mkt 5k). Unemployment rate 5.1%, from 5.2% in July as participation rate falls 0.2ppts to 65.0%.

In August, total employment fell 8.8k as part-time employment declined 9.3k. The outcome was a little below our expectation, but well below that of the market. The July outcome was also revised down to 11.7k, from 14.0k.

What is more crucial however is the decline in the unemployment rate and why this took place. In August. the unemployment rate declined by 0.1ppts to 5.1%. Normally a decline in the unemployment rate is a positive outcome, but in this instance it is indicating that, in the face of a significant reduction in the number of workers wishing to remain in the workforce, the number of jobs actually lost is a little less. The participation rate fell 0.2ppts to 65.0% – this is its lowest level since January 2007.

Had the participation rate not declined over the past year, the unemployment rate would now be around 6%.

Consider the arithmetic of a fall in the unemployment rate despite a fall in the number of jobs. Due to the fall in the participation rate, 35k workers left the workforce. That was offset by an additional 15k workers joining the workforce due to population growth in the month. Consequently, the workforce was reduced by a net 20k, but ‘only’ 9k jobs were lost, so the unemployment rate actually falls.

As discussed , this effect has been prevalent for much of the year with actual jobs growth being a meagre 0.5%, yet the unemployment rate has remained steady. We assess that this data is not indicative of a strong labour market despite the low unemployment rate.

A measure that is not affected by the structural fall in the participation rate is the employment-to-population ratio. This also declined in August to 61.68%, its lowest level since November 2009. The decline in this ratio since its November 2010 peak of 62.58 is equivalent to the loss of around 164k jobs. Clearly a structural change is occurring in the labour market, one that is not supportive of household incomes.

By state, VIC and SA saw significant job declines (15k and 9k respectively); NSW, QLD and WA all saw modest employment growth in the month. This is broadly consistent with the patchwork growth story highlighted by yesterday’s national accounts.

Overall, the August labour force release gives great reason for concern and arguably strengthens the case for near-term rate cuts. Total jobs growth is running at a meek 0.5% and the available evidence suggests workers who have lost their jobs are choosing to give up looking for work. The downtrend in the employment-to-population ratio is of particular concern for household incomes and confidence.

How will the authorities assess this number?

The authorities will be well aware of the distortions to the labour market ‘picture’ which is being indicated by the low unemployment rate. Issues around this data associated with the fall in the terms of trade; weak non mining investment;a soft consumer; and fragile confidence for both households and business will be impacting the authorities decisions. A falling participation rate associated with structural change in the labour market is unlikely to divert their attention from these other issues.

Westpac still expects 2 rate cuts in 2012 with a third to follow in early 2013.

Bill Evans,Chief Economist

David Llewellyn-Smith
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Comments

  1. I don’t know, but is the official ABS data collection and methodology geared towards giving the brightest possible outlook for the political masters?

      • Thanks GSM. The two times I’ve called ABS to discuss the long term data on manufacturing they were very helpful, but as someone who’s worked with stats in engineering I found looking at the data set samples it had changed so much over the years it would be invalid in the way I found stats to work. If they don’t change the method then in x years it will normalise, but it just really hacked me off, as I didn’t expect to find what I did.

  2. Aussie Contrarian

    Regarding fall in participation rate, I read this on a different site. Can you guys pull it apart? It’s seems intuitive, but…?

    “Anyway, it’s the rate of unemployment that matters. A fall in participation rate is a good thing. The ideal is a participation rate of 0.0% leaving everyone to enjoy themselves in their own way. Less hours worked is also a good thing. Maybe people are getting the greater leisure which was promised in the 1970s.”

    • Used to be that a rise was good because it showed strong demand for labour. Now a fall is good because we can all go to the beach.

      This is glass half-full drivel.

      That said, the UE rate is still low so it’s not all bad.

      • Aussie Contrarian

        Yes, the UE rate is very low indeed. Not a bad result at all.

        I guess what I’m saying is that the participation rate doesn’t really tell us anything. People might not be looking for work for a variety of reasons (positive and negative).

        Personally, I’d love to work less if I could still maintain a decent income. I’d be happy to ‘participate’ less in the workforce!

    • Maybe they are doing crap paint jobs and laying down poorly cut, mis-aligned floating floors on their investment properties they want to flip.

  3. Aussie Contrarian

    Another comment from the same site.

    “If more people are not looking for a job, then that might actually be a good thing. It might mean there are more people who feel wealthy and comfortable enough not to have to work. If people do want to work, then they should look for a job and be included in the participation rate. The important figure is the unemployment rate, and that has been more or less steady at close to 5.2% for the past year. “

    • It might mean there are more people who feel wealthy and comfortable enough not to have to work

      That’s not real wealth.

      Real wealth is product brought to market. Product needs to brought to market by labour exerting itself to put it there.

      This is why Spain crashed as an empire.

      When they colonised the Americas, the plundered its gold.

      i.e. they repatriated financial assets, not real assets.

      Financial assets work solely as a ratio to real assets or consumption items.

      For more pople to ‘feel wealthy’, or have claim to real product because they have accrued enough financial assets means less people are either shouldering an increased labour burden, or getting a comparitively lower quality return for their exertion.

      • Aussie Contrarian

        Perhaps that’s one way to look at it. Another way might be that people have such high incomes in Australia (third highest per capita in the world or something?) that there is scope for the participation rate to decline without substantial adverse affect if people ‘drop out’ for positive reasons – spending more time with the family, and they have the wealth, savings or passive income behind them to do this?

        • Another way might be that people have such high incomes in Australia (third highest per capita in the world or something?) that there is scope for the participation rate to decline without substantial adverse affect if people ‘drop out’ for positive reasons – spending more time with the family, and they have the wealth, savings or passive income behind them to do this?

          That would be sound analysis if the other areas supported this.

          However our Current Acount Deficit would say this is not the case, we have not increased our income, we have increased our consumption, withe other side of the ledger being having to pay it back in the future.

          When this is considered, then as I highlighted, ‘passive’ income is, as I said, people claiming that income from the increased effort of those supporting that passive income.

          Namely, young Australians paying the highest ever rent in the world, so the bogan boomers gets to take time off work, and pay back the foreign bank.

          Win-Win… ohh except the young peresons desire to have kids, and the debt that has to be paid back.

          Sounds like No extra ewalth at all 😕

          • Aussie Contrarian

            “Sounds like No extra ewalth at all”

            Perhaps in aggregate?

            But at an individual level, it’s still quite possible that a majority of the people ‘not participating’ in the workforce are doing so because they personally have the wealth or passive income to do so.

            (Yes, and that may come at the expense of others).

        • They might THINK they have wealth NOW, time will tell, but assuming it is true, many could be in for rude shocks. Aussie wealth is heavily imbalanced in property and stocks.

          This is another classic indicator of overconfidence.

          I saw it in the US in 2001, all the “rich brokers” came flooding back to Wall Street after their multi-million 401k retirement funds crashed with the tech bubble. I know it happened in 2009 as well.

        • Without surveys of those who have ‘dropped out’ we don’t really know why the participation rate has fallen.

          Although the RBA has the folowing to say on participation rates

          “Typically during a downturn in the labour market, labour force participation decreases. As the demand for labour declines, and the pool of unemployed increases, job seekers can become discouraged and eventually give up looking for work, thereby moving out of the labour force (which, by definition, requires active job search). ”

          So on balance, a decline in the participation is generally not a good sign. We even could be arguing over noise if the effect of ABS budget cuts has been to reduce the monthly accuracy of the surveys.

    • That is exactly right. Its all about the unemployment rate…its the only number that matters.

      How long do you have to be wrong for before you admit that you’re wrong?

      I note that I’ve been coming to this site regularly for a long time. And everytime I have a bit of a read I see the same bearish drivel!!

      There is going to be a recession one day…and MB will claim they predicted it all along, even though it was supposed to have started years ago!

      Its quite an important point because I’m sure there are people out there who read your blog who are now sitting in a bunker thinking the world’s going to end for years on end…you owe it to these people to come out and admit failure.

      • Aussie Contrarian

        I’m leaning towards agreement with you here, much as it pains me to say it. I’m one person who hwas been waiting for quite a while for things to turn down. I like to think of myself as a contrarian,but it’s hard when the herd seems to be getting it right!

          • It’s like any market, 3D. Two sides of an argument; up or down; buy or sell; borrow or lend. The same market, but each participant hopes for a different outcome from the actions they have taken. Those who have assessed the current global situation as unsustainable and have’ taken cover’ hope for that prudence to be rewarded – their ‘good thing’. Those who haven’t expect a different outcome.

        • It certainly all takes longer than one thinks it will. However, watching the world, I started buying Gold when it was $300 so it hasn’t been a bad strategy.

          Mav’s Nassim Taleb post of yesterday is very relevant here.

          Not sure if it was Taleb or someone else ‘If your house is going to fall down it doesn’t matter all that much if is 3 5 or 10 years…you better start preparing for it.’

          Not only are we not preparing, every time a board creaks we go and dig up some dirt from around the foundations to plug up the gap in the boards.

      • More wild accusations signifying nothing.

        Of course it matters what is happening in the participation rate. It tells you about labour demand. Based on your argument labour demand could fall to a total of 100 jobs but that would be irrelevant if the participation rate falls by the same rate because unemployment would be awesome at 5.1% even as 22 million unemployed people eat each other to survive.

        MB has been published for eighteen months. In that time one post was published speculating about a recession earlier this year. It was subsequently and transparently reprised.

        You got nuthin.

        • Aussie Contrarian

          If 22 million people were so poor that they were forced to eat each other to survive, then it’s likely some of them would be looking for work, in which case they would be counted in the participation rate and the participation rate wouldn’t be falling.

          But if they’re not participating – i.e. they are *choosing* not looking for work, then they’re not likely to be in such of poverty that survival requires cannibalism, right?

          If all 22 million Aussies were so wealthy that they could afford not to bother looking for work, that would be a great thing. Utopia! Cannibalism not required!

        • Don’t insult my intelligence HnH.

          The individual blogs that formed MB were around well before MB was formed. The theme(s) were exactly the same. So the recession/bear theme(s) have been around much longer than 18 months.

          You’re logic is faulty. You have no idea why people are falling out of the workforce. They are out of the workforce and that’s all that matters. Based on demographics the participation rate is going to fall for a long time, so you better get used to it.

          • There’ nothing there to insult.

            You just come here every so often and make shit up.

            Like the last month’s fall in the participation rate resulting from demographics.

            I suggest you need to shave with Occum’s Razor.

          • You really are missing the point.

            We, the punters, get endless sell side positivity from the vested interests – there is absolutely no shortage of that.

            The whole benefit of sites like this is that that they provide a critical analysis.

            Critical analysis … get it! not bearish, not bullish not a vested interest.

            As i’ve said before i look forward to your blog – macrobulls.

          • Just for clarity – “MacroBears” used to go by the handle “BK”. I’m not sure what the purpose of the title change was, but I’ll leave it up to you to decide.

          • Ok Macrobears, forget about the participation rate.

            What is so good about a total jobs average growth of 0.5 percent?

            Is that a great result in the midst of a so-called “boom”… that is fading by the second.

            You can view it anyway you like, but the glass is 50 percent full at the moment, and there is little indication it is likely to rise anytime soon.

            There wasn’t a mainstream economist yesterday saying GDP would be better this quarter or next.

          • In fairness, Macrobears, it’s you who is insulting the intelligence of all MB readers. The line “it hasn’t happened yet so you are wrong” is really beneath contempt. I’d be interested to know if there is one single economic shock that has occurred where the majority of the population wasn’t displaying some version of that thinking. Didn’t stop the shocks happening though.

            As aj says, most readers of MB are here because we like to see an alternative point of view. That point of view happens to make a lot of sense to me, not because I’m a “gloomster” or “permabear”, but because I prefer to base decisions on data and history than on “my mate Dave/Pascoe/Gittins says”. Simple as that really.

            By definition, sceptics will be unpopular and wrong right up to the time they’re proven right. Speaking personally, I’d love to have a rosier view and would greatly welcome some real good news but it seems to be more or less non-existent recently.

      • I’m deeply touched by your concern for my welfare…(and i’m also devastated by my 10+ yield on my bonds last year…)

        Being bearish is just sooo 2009…

  4. Perhaps people in the 55 to 64 age group are giving up the search for work and accessing their super earlier on a hardship basis?

  5. “The authorities will be well aware of the distortions to the labour market ‘picture’ which is being indicated by the low unemployment rate.”

    Which explains why we will be seeing the greatest Treasurer in the World lie through hi teeth tonight on the evening news.

  6. I am always quite bemused by the apparent lack of attention to the underlying construction of the unemployment rate, and the implications for its level of precision.

    The sample used is around 29,000 dwellings. At 1.5 labour force per dwelling (being rough here) that’s around 44,000 labour force.

    So a fall of 0.1% means around 44 people.

    Further, the ABS themselves only quote to 1 decimal place, so 5.1 can mean anything up to 5.1499… and 5.2 can mean anything down to 5.15.

    Further, the ABS acknowledge they do not get a 100% response rate to the survey. They say it’s around 96%.

    Further, around 1/8th of the sample is changed each month.

    Now none of this means you can’t look at the series and see a meaningful trend, but the idea that a one-month change of 0.1% means something other than noise is just weird.

    • DaveC

      You are right about the volatility, which is why the ABS recommends people exam the trend series. I do, and in this instance it is quite instructive. I would describe it as (unoriginally, I confess) the “glass half full/half empty labour market”

      August emp growth: 0.0%
      August unemp growth: 0.0%
      August change in u/r: 0.0%
      August change in p/r: 0.0%

  7. This piece is prominently linked on the website of Australia’s premier financial newspaper, and they wouldn’t do that it if it was nonsense would they?

  8. Why the bloody hell can’t you link to a piece by one of Australia’s leading economic thinkers that puts the alternative view?

    Mod (TP): yeah, you’ve got a point….put that piece up against LVO though? No contest. And I wouldn’t call it an alternative view – its the mainstream permabull view, although I note most of the major insto’s (AMP just put out a higher U/E forecast) are moving in the “bearish” direction.

    • From what I’ve read he-who-cannot-be-named is pretty much on his own this time, although I’m sure Mad Adam will post something similar in the morning.

      Chances are he’ll look an idiot in a few months time, and one should never miss an opportunity to make **** **** look like an idiot.

      Don’t worry his ego can take it!

      • Actually, Lorax, I’ll think you’ll find that Dr Andrew Wilson has added his voice to the rather thin chorus with a tweet on the topic ending “solid overall economy affirmed”. We can all relax then.

    • More or less right. The other key change is the big rise in the participation rate of women. This has driven the overall participation rate in prime working ages (20-54) up over 80%.

      • PS, participation rate here is still quite a bit higher than the US (approx. 58%) as well as unemployment being significantly lower.

    • 3d1k,

      The first graph is of the participation rate by age. Use the scroller thingo at the bottom to get the snapshot at different years. It shows that over time more women and less men are in the labour force at pretty much all ages.

      The recent boost to the labour force that you see at Trading Economics is most likely a combination of demographics – with the increase in those entering the workforce in their teens and twenties outweighing those leaving in the 60s and 70s. (notice the shape of the population pyramid http://www.macrobusiness.com.au/wp-content/uploads/2012/08/AUS_pyramid_2010.png)

      We should expect a significant decline over the next 10-15 years as boomer retire, and the smaller generation of current 5-15 year olds enter the workforce.

      I try not to follow the labour force data so closely, as it is really the trend that matters, and it doesn’t add much if you are looking for signals about future economic performance.

      As Sidelined mentioned, this is a nothing print.

      Will we return to a ‘normal’ unemployment rate in the 6%? Possibly. But the rise of the casual workforce probably means that at any given measured unemployment rate, there is probably more ‘slack’ in the labour market now in the 1980s and 1990s.

      I have to run, but in the release (possibly the quarterly detailed survey) there is data on casual and part-time workers seeking more hours of work – which also informs the interpretation of the figures.

  9. Here is a theory. In 2007 redundancy payments became counted towards a workers IMP ( Income maintence Period).
    Fast forward to 2012. In NSW a Sydney Water Board worker gets retrenched becasuse that arm of Sydney Water has been sold to Veolio. They take half the guys. Worker got paid his leave entitlements that he had banked because he was worried about job security and he got 3 or 4 weeks redundancy up to a maximium of 26 weeks. The fellow wont be eligible providin his wife is not working for centrelink till 2013. So he is not participating and may not if his partner is employed

  10. I hope these permabulls put money where their mouth is .. and go long on AUD, FMG, housing etc.

    Suits me just fine to watch them lose money.

  11. Just a random thought — could the fall in participation rate be explained thus: Workers are being offered wages that are too low. That is, the wages being offered wont cover basic living expenses, so they are better off on welfare, receiving public housing, rather than taking employment that wont cover rent/food/transport/others….

    There was a piece in the MM a year ago stating that plenty of jobs didnt provide enough income to support rent/food/transport costs of those doing the jobs.

    I am wondering if these people have woken up to this, and started ‘choosing’ not to be employed because its simply not worth having a job if/when you face the same hardships that you would face when unemployed (without actually having to go to work each day…).

    Australia needs a massive correction in the cost of living if businesses are going to survive, but no business is volunteering to kickstart the process of lowering the cost of living (except by lowering wages…).

    Does anyone have a *workable* solution to this problem? Clearly you cant offer lower wages until living costs come down, but that requires lowering prices first, which will likely end your business. Lowering wages first, less people will choose employment/buy your services/product, again ending your business. Anyone????

    • could the fall in participation rate be explained thus: Workers are being offered wages that are too low. That is, the wages being offered wont cover basic living expenses, so they are better off on welfare

      I don’t think that’s it. You’re not eligible for unemployment benefits unless actively looking for a job. If you choose not to participate – i.e. not to look for a job, then you don’t get that kind of welfare.

      • dumb_non_economist

        Overflow, you assume that the person looking for work is a sole income earner, they could be married and therefor whether looking for work or not they aren’t entitled to UE benefits. Plus the UE rate doesn’t come from Centrelink, it’s an ABS survey.

        • Yeah but I doubt people claiming unemployment benefit are going to tell the ABS they’ve stopped looking for work.

          Even a compulsive liar would thing twice about telling one government dept they’re looking for work while telling another govt dept they’ve stopped looking!

          • dumb_non_economist

            I doubt very much that an ABS sample comes with names and addresses etc, also think that sharing of data my be against the privacy act.

          • Obviously. But that doesn’t change the fact that even a compulsive liar is unlikely to tell one government dept they’re looking for work while telling another govt dept they’ve stopped looking.

      • but the survey doesnt look at who gets unemployment benefits — so you can be counted as ‘seeking employment, ie. participating, but unemployed’ even though you dont receive welfare. As an example, an unemployed parent with 2 children under school age could need an extra $90 x 2 per day for childcare, and need to use car to travel to/from work… coming from the west, this could involve $30+ a day in tolls and $30+ a day in parking fees, meaning that the ‘average’ wage (after tax) would leave them no better off than on Newstart + FTB allowances…
        I wonder how many people have done the maths and decided there is no point actually taking a job, so apply for jobs such as ‘elephant tusk groomer’ or some other made up skill, so they get Newstart, but wont be offered an interview for an actual job.
        i am sure if you did the maths, many people would not be in a ‘worse off’ position if they were on welfare, compared to working.

        This is not to say welfare is too high, just that variables such as transport and childcare (esp. in sydney) can be so high as to negate the benefits of working.

        Remember, not everyone who receives unemployment benefits is counted as ‘actively looking for work’ by the survey, just as not everyone who receives no benefits is counted as ‘removed from labour force participation’. There are good reasons for this, but it does seem to distort the picture. I am sure UE has posted before about the discrepancy between ‘number of people on Newstart’ vs ‘ABS unemployed number’.

        I am not suggesting this would be the only reason, but i hardly think anyone on unemployment benefits is going to say to centrelink ‘i am no longer interested in working’ if it jepoardises their benefits. They may still fit the definition that is used by the ABS though (in terms of non-participation).

    • Brendan, I’ve heard of that affecting womens decision to work in relation to childcare costs, that is with some jobs all the income, or close to, is used paying for childcare, so it’s not worth working. So I don’t think that is an unreasonable thought.

      To jump in before Phil Best, I think this is how the land price bubble is screwing us collectively, and it’s land costs & rents that really need to fall to improve things.

      • Hamish, I dont think it is necessarily just women… to use my example above: add $20 a week for petrol and you come out at around $3K for the month and this is before you look at food/rent/utilities etc..

        Average wage would not be much more than NewStart + $3K after tax, so for many, the reality is that getting (or keeping) a job doesnt put them in a better position than being unemployed.

        I know articles have appeared here before explaining that the participation rate is not ’employed’ + those on benefits and that unemployed is not JUST those on benefits. This is why I wonder if the fall in participation rate may be an indication of people doing the maths and realising they are no better off having a job.

        Whilst I think it is incredibly sad, I think it is naive to think that people wouldnt be capable of realising when they are no better off, and choosing to have ‘less stress’ by not working (or *really* looking for work)

        @Overflow: There are plenty of people on benefits with no qualifications who stay on benefits by ‘applying’ for jobs that are well above their abilities. (eg. applying for a job requesting MBA’s, when they have no degree/diploma). Still qualify for benefits, cause you are ‘looking’ for work (centrelink can even verify you applied for the job), but in no way are you seriously looking for work.

        • @Overflow: There are plenty of people on benefits with no qualifications who stay on benefits by ‘applying’ for jobs that are well above their abilities. (eg. applying for a job requesting MBA’s, when they have no degree/diploma). Still qualify for benefits, cause you are ‘looking’ for work (centrelink can even verify you applied for the job), but in no way are you seriously looking for work.

          But very few of those people are going to simultaneously tell the ABS they’ve stopped looking for work.

          Anybody doing the dodgy and claiming benefits by pretending to apply for work isn’t going to put that at risk by telling another govt dept that they’ve stopped looking.

  12. “Due to the fall in the participation rate, 35k workers left the workforce. That was offset by an additional 15k workers joining the workforce due to population growth in the month”.

    Can someone more knowledgeable on this topic than I please clarify whether that “due to population growth” addition of jobs is based on real, actual, counted new jobs, perhaps related to (eg) new skilled migrants actually beginning employment?

    Or is it rather, as I cynically suspect, due in no small part to the “revisions” to previously reported data made every issue, a purely mathematical “modelling” addition to the “official” number of “jobs”; one based on nothing but speculative, politically-influenced “dial-a-UE-number” nonsense … a la the notorious US Bureau of Labor Statistics “Birth/Death Adjustment” fudge factor.

    • Indeed, if we are to believe that “population growth” were responsible for the addition of 15k real, actual new jobs in the economy in one month, then it seems to me there must have been either:

      (1) 15k new migrants obtained a job, or
      (2) 15k newborn babies obtained a job, or
      (3) the government’s bureaucrats simply make it up as they go along.

      I suspect the latter. But happy to stand corrected.

        • Per Alex’ helpful explanation below, I can certainly see how that would impact a figure for population of working age. But I fail to see how that could be honestly reported as constituting “15k new jobs added”.

          • I don’t see anywhere that says 15k new jobs were created. I only read it as 15k new members of the workforce (i.e. population of people looking for work – the recently turned 18)

          • For starters, employment did NOT go up, it went down. Bill Evans says so, right there in the very first sentence.

            But to be fair, he has confused you by using the term ‘workforce’ when he should have said ‘labour force.’ There is an important difference, labour force includes both employed and unemployed people, whereas the term ‘workforce’ usually implies only those working, i.e. employed.

    • *crickets*

      I trust that I might be forgiven for perhaps preemptively drawing a conclusion that either my observation is considered by readers and MB bloggers to be so far beyond the pale of reasoned thought as to be beneath contempt … or, my cynicism is well-founded, and so awful are the ramifications (ie, “official” UE data is total BS) that none dare to publicly concur.

      • I believe your conspiracy theory re the ABS to be ill-founded. I have never seen any sign of political influence in ABS output, and I have looked at a lot of it.

        • Are you able to clarify my question Alex? Those 15K jobs added “due to population growth” … how exactly is that figure derived? By actually counting real new jobs? Or by mathematical modelling, per the US BLS’ “Birth/Death Adjustment” factor?

          It’s a serious question.

          • I think I can clarify for you. The participation rate fell from (an estimated) 65.2% to 65%. This is the 35k Bill Evans is talking about. These people leaving the workforce may have had jobs or been looking for employment. This is partially offset by an increase in the population of working age of 15k (again, estimated). The net result of this is that the (estimated) population of workforce age who are either working or looking for work fell by 20k. Because the (estimated) number in work fell by only 9k, unemployment fell.

            All these results are initially derived from the survey of 30,000 households conducted each month.

            For each monthly survey results are scaled up using the latest population estimate. See http://www.abs.gov.au/ausstats/[email protected]/Previousproducts/6202.0Main%20Features999Mar%202012?opendocument&tabname=Summary&prodno=6202.0&issue=Mar%202012&num=&view=

            This article is useful in understanding how population estimates are arrived at http://www.abs.gov.au/ausstats/[email protected]/Latestproducts/3101.0Feature%20Article1Dec%202011?opendocument&tabname=Summary&prodno=3101.0&issue=Dec%202011&num=&view=. Every monthly labour force survey contains information about the possible error in these estimates.

            I do not know how these methods compare with those done in the US. However, I am confident that the ABS produces the best estimates it can, without any consideration for the political implications. I would be surprised if this was not also the case for the US. Do you have any particular reason for thinking US estimates are influenced by political considerations?

          • The bottom line: all labour force data is derived from a survey. All the resultant figures are estimates, with a known level of potential error which is declared in the monthly publication.

            These facts are generally well known to journalists commenting on the survey results, which is one of the reasons most prefer to look at the trend data rather than the month to month figures.

          • Thanks Alex. Without belabouring the point (pun intended), my reaction to this helpful explanation is a resounding “Oh dear!”.

            If the true reality of one of the key pieces of official economic data is that “an increase in the population of working age of 15k (again, estimated)” is classified and reported as “15 new jobs added” … and all on the basis of a “scaled up” survey of 30,000 households … then IMHO it is crystal clear that both we and the “markets” are living under and making key life choices based upon a system of “official data” gathering and reporting that is inadequate at best, and smoke and mirrors at worst.

            Re the USA, it’s instructive to do some research on the BLS’ Birth/Death Adjustment. I recall reading numerous critiques in recent years demonstrating that, in many instances, fully 100% of the claimed “jobs added” to the US economy in a given month were thanks to those added by the B/D Adjustment. Sounds to me like we have the same/similar farce going on here.

          • Opinion8red.

            “If the true reality of one of the key pieces of official economic data is that “an increase in the population of working age of 15k (again, estimated)” is classified and reported as “15 new jobs added””

            No, employment went DOWN, not up, therefore 15k new jobs were NOT added. Rather, 8.8k jobs were lost. Its right there in the first sentence of Bill Evan’s report.

          • in many instances, fully 100% of the claimed “jobs added” to the US economy in a given month were thanks to those added by the B/D Adjustment.

            That may well be so, but it is just because that is the way the figures come out. I still very much doubt that there is any political interference. These statistics are subject to international agreements about definitions, methodology etc and the US figures would be carefully scrutinised by their international counterparts. Any funny business would be quickly picked up.

            A lot of this comes down to how the numbers are presented and how the media interprets them. I doubt if the US BLS presents such figures as “jobs added” but I can imagine they might be spun that way by the politicians.

      • I’m not sure they make up the statistics – but i sure hope they have some good systems to vet the rubbish data they get served up by the disinterested…

  13. I’m struggling to see why people find the fall in participation rate to be a negative. Sounds like people are choosing to retire, take holidays, look after the kids etc instead of work.

    Fewer people looking for work is surely a positive development?

    I don’t buy the idea that people have just ‘given up’ looking for work because they can’t find a decent job. You’re not eligible for unemployment benefits unless actively looking for a job, so it would be silly not to look for one if you needed one.

    Whatever way you look at it these unemployment figures are amazingly strong (to my surprise). I had expected things to be a lot worse by now. I’m wondering if I’m spending a disproportionate amount of time reading ‘bearish’ commentary and getting a skewed picture of reality!

    • I’m not sure the job has to be qualified with ‘decent’. I know of several ex-workers who have found themselves out of a well paid job, and are unable to re-enter the same field, and do not have the desire or need to re-train etc. eg: bankers who after, say, 30 years in the business find themselves unemployed in their late 40’s, and have’ enough’ to sustain their lifestyles and have a very narrow and crowded marketlace to try and find a job.

      • Hi Janet. So they’re choosing not to participate because they already have ‘enough’ to sustain their lifestyles without working.

        Is that a bad thing?

        A lot of people seem to be jumping on the falling participation rate as a ‘bearish’ signal, but I’m struggling to find a ‘negative’ reason for the participation rate to fall. The only reason I can think of for a falling participation rate is that more people have the luxury of choosing not to work.

    • A fall in the participation rate, in the absence of evidence that people’s lives have suddenly become so awesome they can afford to give up working, is not a positive development. A quick look at history will show that participation rates generally fall during recessions and downturns.

      You don’t sound at all surprised, or sincere.

  14. I’d love to see a breakdown of who’s leaving the market. I postulate that it’s mainly women with children. Our day care has just gone up to 130 bucks a day. 33800pa – 7500 rebate = 26300 once you have a second child you’d have to be earning over 80k a year just to break even

  15. Overflow said “You’re not eligible for unemployment benefits unless actively looking for a job…” but from July 1st, you had to be 22 to get Newstart Allowance. Youth Allowance is means tested, not everyone gets it. The “luxury” of “choosing not to work” for young people probably means they will never aspire to housing or career as we once knew it.
    IMHO the participation rate statistics are bunkum.