Macquarie Bank has discovered something odd in Australia's jobs data

Theo Wargo/ Getty Images for Firefly.
  • Australia’s jobs report for June was stellar, and unexpected.
  • Over the past four months, employment increased by 86,100, including 50,900 in June alone. 45,500 of those were among women aged 15 to 24 in part-time employment, an unusually large contribution.
  • The ABS seasonally adjusted jobs data is notoriously volatile, leading to widespread distrust in markets. Perhaps it’s time to ditch the seasonally adjusted series all together?

Australian employment growth soared in June, lifting by 50,900 in seasonally adjusted terms, the largest gain this year.

After a slow start to the June quarter, it was a welcome result. Jobs up, full-time employment up, hours worked up, participation up and unemployment down to the lowest level since November 2012.

Given some leading labour market indicators have weakened in recent months, it was a spectacular result, helping to partially reverse the slowdown seen this year.

However, the ABS seasonally adjusted data is volatile which, coupled with well documented troubles the Bureau had with the jobs report a few years back, continues to raise questions as to whether the figures truly reflect what’s happening in the labour market.

This oddity uncovered from Macquarie Bank will do little to appease those concerns.

“More than half of total employment growth over the past four months has been accounted for by 15-24 year old females in part-time employment,” said Justin Fabo and Ric Deverell, Economists at Macquarie.

We decided to check it out.

Unsurprisingly, they were right.

Of the 86,096 increase in employment seen since March, 45,514 came from 15 to 24-year-old females in part-time employment.

As seen in the chart below, while the ABS seasonally adjusted data is fairly wild, often reversing moves seen in the prior month, that pattern has changed since March with big gains recorded, especially between March to May.

“That just looks plain weird to us and our experience suggests that this could, in part, reflect seasonal adjustment difficulties,” Fabo and Deverell said.

It does look a little strange.

Maybe it reflects reality. But then again, maybe it doesn’t, providing the latest in a long string of instances that explains the widespread distrust towards the seasonally adjusted data.

To its credit, the ABS has told markets that its trend estimates are the best measure of underlying themes in the labour market.

However, markets continue to move off the seasonally adjusted data — an understandable reaction given the wild swings provide plenty of opportunity for traders to exit and establish positions.

As much as the ABS attempts to swing markets towards the trend series, its attempts will almost certainly be ignored.

While traders may not like it, if the best measure is the trend series, perhaps it’s time for the ABS to abandon it all together.

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