Australia’s August jobs report will be released later on this morning, a notoriously volatile data series that has the ability to create extreme market movements in Australian interest rates and the dollar.
Traders love it, other don’t, while economists, and more importantly the RBA, tend to favour the less-volatile trend employment series.
While there is often scepticism over the reliability of the seasonally-adjusted figures, ANZ believes there is a significant reason why the August release should be “handled with care” – stricter requirements from the government to allow jobseekers to obtain unemployment benefits.
“It is possible that the sharp rise in the official unemployment rate in July was partly the result of new and stricter government requirements for some jobseekers to receive unemployment benefits from 1 July,” notes Justin Fabo, senior economist from ANZ.
“This would be the case if some respondents to the ABS labour force survey from 1 July now satisfied the ABS definition of unemployment due to more active job search steps now being undertaken to receive unemployment benefits”.
In July Australia’s unemployment rate soared to 6.34%, the equal highest level seen since August 2002. A sharp increase in labour market participation – up 76,159 which was also the largest monthly increase since August 2002 – was largely responsible for the sharp increase registered in unemployment.
Clearly something strange happened to the data in July, particularly as nearly half of the national increase in the labour force came from women in New South Wales.
Fabo believes that it is hard to gauge just how much the change to jobseeker requirements contributed to the gain in labour market participation in July, and whether or not the reported increase will be permanent.
“If it is real and significant in size, however, then there is a risk of permanency to the sharp jump in the jobless rate seen in July even if the true pool of unemployed or available labour may not have really changed”, he stated.
Having seen the ABS apply amended working age population estimates to prior employment data yesterday – they lowered estimated labour market growth this year from 1.7% to 1.5% – economists expect the unemployment rate to fall back to 6.2% in August despite forecasting job growth of just 5,000.
That suggests that many expect the huge increase registered in labour force participation in July will be partially reversed in August.
While that’s the consensus, not everyone believes the unemployment rate will decline today.
In a story released earlier today, Peter Martin, economics editor at Fairfax Media, suggests that changes to jobseeker requirements could potentially see the unemployment rate jump to as high as 6.5%.
“Prepare to be shocked. On Thursday the Bureau of Statistics is likely to tell us that the unemployment rate has scaled new heights, climbing from 6.3 per cent to as much as 6.5%”, he wrote.
Given the level of uncertainty heading into the August report, it’s likely to create an ever greater than normal amount of volatility no matter how the data prints.
The data will be released at 11.30am AEDT. You can read more from Martin here.
Business Insider Emails & Alerts
Site highlights each day to your inbox.