The US non-farm payrolls report is undoubtedly the most import data release in the world each month.
It is is analysed on every aspect and, eventually, used to make policy and investment decisions.
You would want a release like this to be accurate. If not it could have horrible consequences.
As the US economy has emerged from the ruins of the GFC, the monthly number in the data has been growing fairly steadily, reflecting the economic recovery.
Australia’s employment data, in contrast, tends to move around a lot more. We received a good example of this today with the April data showing 2,900 jobs lost for the month, disappointing the market which was expecting a muted 5,000 extra jobs.
Bizarrely the report said 47,900 males lost full-time jobs last month, a number which is very hard to believe, and another example of why many in the markets continue to question the reliability of the Australian employment data.
Likewise, an unusually strong March number of 37,700 jobs added was revised upwards by 10,000. One analyst today noted the strong March data — translated to the US economy — would equate to 567,000 jobs added in the US in a single month.
What would Australia’s jobs report look like if we were an economy the size of the United States? After some number crunching on data provided by ABS and BEA, we have the answer.
We applied monthly movements in the Australian jobs report over the past five years but adjusted them to reflect the size of the US labour force.
Here’s the chart.
The relative stability of the non-farm payrolls number — reported in grey — is about as far-removed from the volatility found in the Australian jobs equivalent that is represented in green. One is consistent and one looks like an earthquake seismograph.
There are important differences in how the surveys are conducted. NFP is based off payrolls growth reported, while in Australia it’s based on a population sample. But it does make you wonder how effective the Australian data is when it comes to policy and investment decisions. Short-term traders love it but beyond that it creates far more questions than answers.
While budgetary impacts have no doubt had an impact, instead of throwing more money at the current survey, perhaps it’s time to rethink how to derive a more accurate labour market benchmark.
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