After a stellar run over the second half of 2015, Australian employment growth has hit the wall in the past three months, falling by 6,600 between December and February after seasonal adjustments.
The series of underwhelming jobs reports, along with nuances in the way the ABS survey is conducted, has the NAB’s economics team on alert for the possibility of an unbelievably strong jobs number being reported for March.
Here’s a snippet from a research note released by the bank this afternoon explaining why. Our emphasis in bold.
For this month, NAB expects unbelievably strong employment growth of 40,000, which is substantially stronger than the market consensus of 17,000. Although the NAB survey’s employment series is suggestive of employment growth of around 15-20k a month, the ABS has noted that sample rotation could contribute towards headline employment growth in the month.
Sample rotation has previously added significantly to employment growth. This month the ABS has noted that the outgoing 1/8th of the sample has a lower employment to population ratio compared to the existing 7/8th of the sample. NAB has calculated that if the incoming sample were to have the same employment to population ratio as the existing sample then employment growth could be anywhere between 80 to 100k!
According to the bank, the only reason it is forecasting an increase in employment of 40,000 — not more — is because the incoming sample may not have these characteristics, and because the trend in SEEK job advertisements has been very weak for the past three months in Western Australia, falling 4 to 5% on each occasion.
Despite the huge increase in employment expected, the NAB suggests that labour market participation will increase to 65.0% from 64.9% in February, leaving the unemployment rate steady at 5.8% if realised.
The Australian Bureau of Statistics will release its March jobs report on Thursday at 11.30am AEST.
On the analysis presented by NAB, it looks like the market reaction may be even more wild than normal.