Friday, March 15, 2013

71,500 more jobs. It isn't true, the Treasury knows it.

Julia Gillard grabbed it as a gift from heaven.

“Today we can say, since this Government came to office, we created 926,000 jobs,” she told parliament. “We have seen an increase in the number of jobs of 71,500 in the last month. For the information of the house, this is the largest monthly increase in jobs since July 2000. This is the best monthly job creation result in 13 years. To give this some perspective, the US economy created 236,000 jobs in February. They are 15 times bigger than us and we are creating jobs so their job creation is only three times bigger.”

Except that it wasn’t true.

The Bureau of Statistics had confirmed earlier in the day that the figures it published for February showing the unusual jump in employment of 71,500 overstated the increase, most likely by a factor of two.

To understand why, its necessary to examine the way the figures are created.

Each month the Bureau surveys around 29,000 homes.

One-eighth of the group, around 3600 homes, leave the survey each month and a new 3600 are “rotated” in.

Rarely, usually only once every one or two years, employment conditions in the new homes are quite different to those in the old.

When that happens the official employment numbers jump (or fall) even if employment itself hasn’t changed.

The houses rotated in in February were extremely different to the houses rotated out. So different that the Bureau believes the rotation itself was responsible for half of the reported 71,500 surge in employment, the “best monthly job creation result in 13 years”.

Bureau staff briefed government officials Thursday morning.

Another unusual occurrence “amplified” the error. To convert its survey into answers for the entire population, the Bureau multiplies the result by a number based on its guess of the population.

Its best guess is that Australia’s working age population soared by more than usual at the start of this year as a greater than usual number of foreign students arrived. It reckons this further exaggerated the already-exaggerated employment growth, perhaps by another 13 per cent.

It would prefer people to look at its estimate of what it calls the trend. This shows employment climbed at a sedate pace of 11,600 in February, much less than 71,500 and just enough to keep pace with population.

The unemployment rate remained steady at 5.4 per cent. The NSW rate inched up from 5.1 to 5.2 per cent. The Victorian rate slipped from 6.1 to 5.5 per cent. Victoria accounted for more than half of the reported 71,500 surge in employment.

In today's Sydney Morning Herald and Age

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