You’ll hear a lot about the employment and unemployment numbers that were released today over the next 24 hours because while on the face of it they weren’t bad numbers there is plenty of support for the bulls and the bears on the Australian economy.
But the problem with economic data when it is released it is that it is subject to error, revision, biases, misinterpretation and ignorance.
It’s why sometimes what seems apparent on main street doesn’t show up on George, Collins or Queen streets, in the economic data or in the economic commentary.
So, like beauty, economic statistics can sometimes be in the eye of the beholder.
Take today’s jobs data from the ABS for example.
Employment rose 1,100 which was less than the 10,000 the market expected but unemployment hit the 5.7% level the market thought it would.
On the face of it that is pretty much on the money when you take into account the fact that the ABS says the standard error for employment this month is 28,600 which means that there are two chances in three that the actual move in employment lies in the range of -27,500 to +29,700.
And it’s exactly this dispersion of where the actual outcome that can leave a rise of 1,100 in employment and increase in the unemployment rate to 5.7% subject to conjecture.
Indeed both the ANZ and CBA economics teams see the employment picture as currently weak but showing signs of life, something Business Insider pointed to earlier today.
The CBA wrote in a note to clients:
“The headline figures were pretty disappointing today, but digging beneath the surface reveals that the picture is not all bleak. Monthly hours worked, a leading indicator of employment, increased by 6.2 million hours in October. This occurred despite a fall in full‑time jobs and an offsetting increase in part‑time jobs. One interpretation is that those workers in full‑time jobs are working more hours than previously. This is generally a positive sign for future employment growth. Rising hours worked per employee should eventually translate into an increase in hiring. ”
The ANZ offered this chart as support of the notion that as capacity tightens employment will rise.
Shane Oliver at AMP Capital agreed that the outlook is on the improve for employment given leading indicators but he, like many other economists, focussed on the falling participation rate noting:
The decline in the participation rate, which is due to a combination of discouraged workers giving up the search for jobs along with baby boomers starting to retire, is masking a more significant rise in the unemployment rate. For example, if the participation rate had remained at its 2011 average of 65.5%, the unemployment rate would now be running around 6.8%.
Which is a scary statistic indeed – at 6.8% there would be no debate about a higher Aussie dollar or whether or not rates were going lower – they just would.
Or, perhaps not: it’s the double-edged sword, the beauty and difficulty, in economics and markets – with statistically noisy data there is always more uncertainty than certainty.
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