It would be an understatement to say that the April unemployment and jobless rate figures today have staggered markets, the Government and regulators.
They have because they showed an unexpected strong rise in the seasonally adjusted new jobs figures and a sharp fall in the unemployment rate: both of which flies directly in the face of what seems to be happening in the economy.
The trend figures showed another slight worsening in the month, but the seasonally adjusted report was so different as to be unbelievable.
They paint a picture of an economy in boom, not gloom. As we said yesterday, if there wasn’t a recession, we would have had a rate rise Tuesday, or next month on the basis of the data flow this week.
Today’s ABS report also contradicted the other major employment survey from the Roy Morgan group, which was released earlier in the week. It showed a rise in the unemployment rate and the number of people out of work.
“In the month of April Australia’s total unemployment as measured by Roy Morgan was 799,000 (7.1%), up 24,000 (0.1%) since March, and up 191,000 since April 2008,” Morgan said.
There’s an old adage in the stockmarket called ‘The trend be your friend’ when buying and selling shares. It’s all to do with how the trend in the market is influencing shares (rising trend, falling trend). Momentum is linked to it, so is sentiment (gut feeling). It can quite often be at odds with what the figures are saying on profits, sales and etc.
A bit like now with the sunshine believers among investors thinking the end is over, and the reality of the economy one of continuing recession.
And so it is with the April Labour Force figures showing a seasonally adjusted rise in new jobs and a fall in the unemployment rate to 5.4%, from the 5.7% of March.
That is so totally at odds with what is being reported (yes, I know it’s anecdotal evidence) from the economy of job losses, slowing demand (notwithstanding the 2.2% rise in retail sales and stronger business approvals in March).
So while taking account of the seasonally adjusted figures from the Australian Bureau of Statistics which showed the unemployment rate falling to 5.4% and a 27,300 rise in employment, take a look at the trend figures provided by the ABS.
There the trend saw a fall of 4300 in the number of people employed in April and a rise in the unemployment rate to 5.5% from 5.4% in March.
In the absence of any better evidence, that’s probably a clearer picture of employment in this country now, than the seasonally adjusted figures are, especially as the ABS has been using a small sample size since last July and there have been questions asked about at least one other month’s report since then.
The ABS also reworked its retail sales numbers at the same time and used a smaller sample in the new series, and got some hard to believe (and non-seasonally adjusted figures) that didn’t last. The ABS was forced to return to the old series and sample size for retail sales.
Why this wasn’t done at the same time for the Labour Force series is puzzling, especially as unemployment will be by far the major economic and social problem in the next 18 months to two years and having a generally believed statistical basis would be a big help.
In trend terms, the ABS reported this morning that:
In April “employment decreased to 10,790,600; unemployment increased to 630,800; unemployment rate increased to 5.5%; unemployment rate increased to 65.5%.
For the seasonally adjusted figures for April the ABS said. “unemployment increased by 27,300 to 10,798,900. Full-time employment increased by 49,100 to 7,672,700 and part-time employment decreased by 21,800 to 3,126,200; unemployment decreased by 35,300 to 614,600.
The number of persons looking for full-time work decreased by 17,800 to 443,500 and the number of persons looking for part-time work decreased by 17,400 to 171,100; unemployment rate decreased by 0.3 percentage points to 5.4%.
The male unemployment rate decreased by 0.2 percentage points to 5.5%, and the female unemployment rate decreased by 0.4 percentage points to 5.3% and the uparticipation rate decreased by 0.1 percentage point to 65.4%.
So are we to believe that this is all a one quarter wonder, perhaps two and that the slump is over?
We know that the strong rise in retail sales in March was due to the early spending from the second, bigger stimulus package, and we know that the rise in new building approvals was mostly driven by the first home buyers grants for new homes. Home prices though had a record fall in the March quarter as higher-priced homes lost value faster than middling or cheaper homes.
We also know that the main driver in the near record March trade surplus of almost $2.5 billion was a sharp fall in imports as the mining boom fades and capital good orders are cancelled.
But if the seasonally adjusted figures prove to be accurate and are not reversed in coming months, then there’s a lot of egg all over the place, from the Reserve Bank, to Federal Treasury, to the Prime Minister, to the Federal Treasurer, the Federal Opposition, and everyone else who has felt (less than empirically) that things in the economy were getting worse.
Next week’s budget will be proven to be horribly expansionary, as will the RBA’s 4.25% in rate cuts.
I think certain policy making groups will be sweating on the next release of the Labour Force stats from the ABS, and in the meantime will be having a long chat with the folk at the Bureau about the reliability of the samples and analysis.