The Guardian’s Greg Jericho has written another solid post questioning the reported boom in employment in the latest ABS labour market report for February:
…the labour force figures come from a rotational survey of about 52,200 people… From this survey the ABS estimates the result for the entire nation…
Even though the adjusted figures take some things into account, there is still a degree of statistical noise that causes the figure to jump around more than it would were the ABS able to survey the entire population.
And that certainly happened in February… [where]… the number of people estimated to be employed full-time jumped by 1% in seasonally adjusted terms.
So do I buy it? Nope.
And nor does the ABS…
So, what to believe? As ever, trust the trend.
The ABS recommends comparing the trend rates each month. By that measure full-time employment grew by only 0.08% in February, which, far from being a boom, is almost half the average monthly growth over the past 10 years. It is, however, the biggest such increase since October 2012.
We can also focus on the annual growth, as this provides greater context and less noise. On this score we see full-time employment has actually fallen in the past 12 months by 0.3% in trend terms…
This suggests that far from there being a turn in the corner, unemployment seems likely to rise above 6%.
The labour force figures did provide good news, but news that needs to be treated with a great deal of caution, and should be reported as such.
Ricardian Ambivalence has provided a even harsher critique, arguing that the February survey was likely “bunkum”:
The survey is not designed to measure the number of jobs, and if you use a household survey for this purpose you are going to get stupid results some of the time … this is one of those times. After accounting for the silliness, the number of jobs added in Feb 2014 seems more likely to be -5k, rather than +47.3k…
My bottom line on this report is that it’s a bit of a joke. The trends are consistent with an economy that’s responding to lower rates as you would expect – but it’s still not clear if that’s going to be enough given the headwinds that are blowing from resource investment, fiscal policy and (potentially) slower Chinese growth.
Ricardian Ambivalence also points out that a similar erroneous result was delivered in February 2013, whereby 71,500 jobs were supposedly added. However, that result was driven largely by “sample rotation and bad seasonal factors”, which biased the result upwards, as appears to have occurred this time as well.
In any event, commentators need to wait a few more months before declaring that the labour market has turned.
