Friday, December 07, 2012

The truth about jobs

They weren't flat during 2011 at all.

That's what the grey line shows - flat jobs growth during 2011, until now the official picture:

The black line is revision published Thursday.

Instead of staying fairly flat during 2011 (slipping 1200), during that year employment climbed 48,700.

It is an important difference.

Did the Bureau of Statistics suspect that it had been reporting misleading jobs growth figures at the time? Yes it did.

As Tim Colebatch reported:

"The official jobs figures published by the Bureau of Statistics have significantly underestimated recent job growth, due to forecasting errors that first overstated, then understated, the growth in the adult population.

The errors, which have serious implications for economic policy, began when the number of foreign students living in Australia fell rapidly after immigration laws were tightened in late 2009.

The unforeseen fall at first led Bureau forecasters to greatly overstate population growth — and When it realised the error, rather than correct it by revising the previous jobs figures the Bureau decided to understate population growth in future forecasts, depressing the labour force figures. These then reported a net loss of 900 jobs in 2011.

On one estimate, once the figures are adjusted for the erroneous forecasts, at least 100,000 of the jobs supposedly created in 2010 in fact arrived in 2011."

To repeat: rather than revise previous jobs figures when it found they were wrong, the Bureau understated future population growth estimates in order to depress future reported jobs growth.

It will do so no longer.

Instead it will revise employment figures when it learns they are wrong, rather than downwardly or upwardly biasing future figures. The adjustments will take place every six months, and from 2014 every three months.

Earlier this year the Australian Statistician Brian Pink signed a letter to the editor of the Sydney Morning Herald defending the old practice.

The letter said:

"Your articles have suggested that we will not revise history more frequently than five-yearly, as is our current practice. There is presently no compelling case for doing this, as there is unlikely to be any change of statistical significance, and it will make little difference to decisions that have already been taken based on the high quality statistics the ABS has already published."

He has now found the case compelling and that's to be applauded. Big time.

In Markets Live

Recommended reading

. ABS: Rebenchmarking of Labour Force Series

Related Posts

. January: "For job seekers it was the worst in 20 years"

. May: Tim Colebatch has cracked it. Why the jobs data is flawed

. July: Jobs growth not as we said - ABS