Monday, September 12, 2011

Employment. What if it hasn't stopped growing?

No wonder we’re having a jobs forum. All through last year the jobs graph headed north - we created 30,150 per month. Since January the graph has been almost flat.

We’ve created just 10,100 all year - 1442 per month nationwide. In the past three months employment has gone backwards. We employ fewer people than we did in May.

If things continue as they have so far this year it will take 29 years - not the promised two - to create the forecast 500,000 new jobs.

Unless the figures are wrong, as they sometimes are.

The ABS itself acknowledges the possibility on page 2 of every monthly Labour Force publication. In August when it reported 9700 jobs lost it said it could only truly be confident there were between 64,300 jobs lost and 44,900 jobs gained.

The lack of precision isn’t primarily a matter of sample size. The problem is that the selected households change. Not every household every month - that would leave the result highly dependent on which households were picked - but slowly, with one eighth of the enormous sample dropping out each month and a new one eighth joining.

Chance dictates that occasionally - no matter how random the process - a highly-employed group will leave the survey to be replaced by a less-employed group, or visa versa. At those times the reported rate of job creation will be held back, or advanced.

It is possible - but not easy - to get a better handle on what has really changed month to month by examining changes only in the employment status of those households already in the survey - around seven eighths of the total...

Although the Bureau publishes the data (“gross flows in matched records”) it doesn’t bulk it up to match the population and it doesn’t seasonally adjust it.
Kieran Davies at RBS Australia has performed the calculations and find that for the past decade the two sets of figures moved together. Until last year when the published figures surged ahead of the matched sample suggesting a group of highly-employed households had been rotated in.

This year the published figures have fallen well behind the matched sample suggesting the highly-employed group has been rotated out and a less-employed group rotated in.

The matched sample suggests in reality we’re still creating around 17,000 new jobs per month - about what we were last year. It isn’t a crisis. The official figures will catch up.

Published in today's SMH and Age

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