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


Mark the Graph said...

A good move from the ABS!

Anonymous said...

Peter I’ve been following your crusade with amusement and I’ve been wondering whether your oblivious to the fact that you’ve been used as a political toy by Treasury or if you are complicit in this latest smoke screen. If it’s the former then you might want to take a shower because you should feel used.

Yes you have insisted that this revision changes the story of employment and well in one sense it does, it changes the political story. Not because the figures have changed by the proposed 100K suggested by yourself and the Age cheer squad. No, this was more subtle and achieved by deception and political gamesmanship.

You and Treasury created a controversy by first Treasury leaking to you and Colebatch modeling that grossly over stated potential revisions (100K was a little too obvious). You and Colebatch then set about doing Treasury’s bidding by pressuring the ABS in a public forum, essentially embarrassing them into the revisions. The ‘story’ then changed from one of 2011 being a year of weak employment growth to; the ABS buggered it up and employment was grossly understated in 2011.

However, I suspect you know that the real story hasn’t changed. Most economists who are not politically compromised understand it. The story is that employment growth in 2011 was and still is one of the weakest on record. The revisions did not change the fact that

• 2011 was the weakest in actual terms since the 1990’s.
• and that in % growth terms it was the 5th weakest ever…yes ever!

In my view the story didn’t change Peter, you might have changed the perception of that story but the fact remains 2011 was weak on any measure and remained so even after revisions.

But you achieved your goal in making the government seem to look better so give yourself a pat on the back. Keep in mind though Peter nothing is free. So let’s stay tuned to see how much this has cost. I suspect that the ABS has had to cut back on other things to accommodate your political crusade…and yes it was political because it changed a political story not a real story. You should go and have that shower now.

Anonymous said...

Do you have a response to Anonymous's charge Peter?

I think he is correct that even after the revision, employment growth was - and still is - weak. The argument for the revision may be factual but it has clouded the story. The labour market in 2011 did not recess but nor did it do a great deal more than stagnate.

Anonymous said...

Another interesting point is that the ABS highlighted that erp (population) was likely to be revised differently this time around because of the large intercensal error. So we could potentially see the employment figures go back to what they were originally.

So all this revising would be for nought. Something that was always a possibility. But all this would be after an election and Treasury needed to 'change the story' for 2011 before the election. So they give Peter and Tim Colebatch some bogus data and away they go and create a distraction that changes the focus or perception that 2011 was such a crappy year.

After the election is held the employment figures will be revised down again and were back to were we were to start with that is nothing changed and 2011 was still a crappy year.

Anonymous said...

Yeah he (the statistician) found the case compelling because you and the Colebatch gave him no choice. In my opinion you have abused your trusted position as a journalist and if you were fair dinkum you would apologise for the deception you have facilitated. like the others have said above...2011 was weak revision or not.

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