From Tim Toohey and Co on the ABS’s labour market revisions:
[The] announcement by the ABS is welcome news in the sense that it confirms our suspicions that the August jobs print was a rogue number overstating the strength of conditions in the Australian labour market. However, key aspects of the announcement are problematic, and it would seem that these data are still some way from providing us a clean read on underlying trends.
In particular, it is not clear to us that the month of August continues to be affected by significant seasonality. Indeed, running an X12 seasonal adjustment process over the full 37 year history of the data highlights that only the month of January is seasonally weaker than August, and that this seasonality has actually increased more recently since the financial crisis. And putting an X12 process aside, the same conclusions can also be backed out from the seasonal factors implied by ABS’s own original/seasonally adjusted series. Finally, while these calculations seem to suggest that seasonality in August has – if anything – increased, the seasonal factors for June and July look to have been fairly stable to us – which again raises questions about why the ABS has opted to assume a seasonal factor of one for those months, and whether or not that assumption will be adjusted again into the future.
Overall, today’s decision by the ABS is an intriguing one, but it remains difficult to have great confidence interpreting signals from the labour force report at this point. Hopefully the review (the results which “will be presented in due course”) will resolve some of the key issues and provide clarity on the outlook. In the interim, the broad sweep of indicators on the labour market continue to highlight a significant degree of spare capacity, which is serving to weigh on wages and broader inflation. We expect this to remain the case over the coming year, and have revised our forecasts for tomorrow’s release to the following: employment: +15k; unemployment rate: 6.0%; participation rate: 64.9%.
In short, it’s a schmozzle.
