Getting right to the point, my view is that the Feb 2014 jobs report is bunkum. The survey is not designed to measure the number of jobs, and if you use a household survey for this purpose you are going to get stupid results some of the time … this is one of those times. After accounting for the silliness, the number of jobs added in Feb 2014 seems more likely to be -5k, rather than +47.3k.
We’ve seen this before — just last year in the Feb 2013 Jobs report. Check it out, and you’ll remember the prior ‘turning point’ in the labour market – the +71.5k jobs was evidence that all the prior reports were bunkum, that the labour market was responding to lower rates, and that rate cuts were over ….
Except that it wasn’t … it was a bug due to sample rotation and bad seasonal factors, and not only did the RBA cut in May and August, but the number has since been revised down to a more sociable +26.6k.
Yesterday’s report had the same problems – and the ABS (again) made a statement reporting that there was an issue with sample rotation.
Anyhow, it’s worth reviewing the data in any case, because the new seasonal factors change the story a little. First, note the slightly better performance of the labour market over the last few months. This now seems more consistent with GDP and business surveys.
Regular readers will know i dislike the jobs numbers in part as i do not trust the population benchmarks – the right way to get around that is to look at how the proportion of the population in work is changing. Even after seasonal reanalysis the employment share remains weak (excepting Feb).
Reflecting this, the unemployment rates continue to trend up. Another odd feature of the new data is the spike in female unemployment. It looks like this is tied up with the sample issues (they produced a spike in employment, full time employment, and participation). The unemployment rate rose 5bps to be just a whisker under 6.05% — so we almost printed a 6.1% on the screens.
The higher participation rate (more people looking for work) hid in part the higher employment estimate. The employment to population ratio exposes this clearly – it’s a small uptick (and it might not be real), but there’s still ample slack in the labour market.
My bottom line on this report is that it’s a bit of a joke. The trends are consistent with an economy that’s responding to lower rates as you would expect – but it’s still not clear if that’s going to be enough given the headwinds that are blowing from resource investment, fiscal policy and (potentially) slower Chinese growth.