From Bloxo today with another good take on the ABS jobs numbers:
The survey suggested that employment rose by 71k in November (market expected -10k, HSBC expected -15k). Over the past six months, employment growth has averaged +32k a month. Annual employment growth lifted to 3.0%.
– Sample rotation played a significant role in the monthly change in employment. Of the 70k (non-seasonally adjusted) increase, roughly 76% was attributable to the fact that the group coming into the sample had a (seemingly significantly) higher rate of employment than the group falling out of the sample.
– The survey showed that the participation rate rose by 0.3ppt to 65.3%, and has increased by 0.7ppts over the past year.
– According to the survey, the unemployment rate fell 0.1ppts to 5.8% (market and HSBC expected 6.0%). That is the lowest reading since April 2014. In trend terms, the unemployment rate was 6.0%, having slowly fallen from 6.2% in February 2015.
– The survey showed that total hours worked fell by -0.8% m-o-m in November, following a couple of strong increases in previous months. Trend growth in hours worked stands at 3.0% y-o-y, the strongest since January 2011.
Implications
It is hard to know what to make of today’s official labour force numbers. Taken literally, they suggest that the economy is no less than booming. Employment picked up by 71k jobs in November, which followed 56k jobs in October, for growth of 3.0% over the past year; as printed, the unemployment rate fell to new cyclical low of 5.8% and the participation rate jumped by a very strong 0.3ppts to a new recent high of 65.3%.However, we know that the official labour force survey has had significant measurement issues in recent times and this month the survey was also subject to a sample rotation, which may have added to these problems.
Sample rotation played a significant role in the monthly change in employment. Of the 71k (non-seasonally adjusted) increase, roughly 76% was attributable to the fact that the group coming into the sample had a (seemingly significantly) higher rate of employment than the group falling out of the sample.
As has been the case for more than a year now, we are increasingly relying on other surveys to give a clear reading of developments in the labour market. These surveys have generally shown that the labour market is improving at a modest pace, but do not suggest that things are booming. Job advertisements have continued to trend higher and consumer expectations of unemployment have also fallen from their peaks. Business surveys show a gradual rise in hiring intentions.
We suspect that the RBA will also discount the official numbers to a large degree, given the measurement issues. Nonetheless, general trends are positive and support the RBA’s current stance of waiting and watching. We have an RBA cut pencilled in for Q1 2016, but acknowledge that if the much stronger labour market numbers prove to be a sustained and statistically robust trend, further cuts would be unlikely.
That is close to my view.
