Labour force shenanigans

How to interpret the effect of future job starters?

Australia’s January labour force data surprised many with its weakness.

There was no bounce-back in measured employment following the sharp decline in December, and the unemployment rate rose to a 2-year high of 4.1%.

But part of this is likely to be noise.

The ABS published analysis on “job attachment”, in part as a warning to not read too much into the ‘surprising’ outcomes in the January data.

Notably, the ABS highlighted that:

“… the increase in the number of unemployed future starters [in January] is important to consider when interpreting the increase in the seasonally adjusted estimate of unemployment”.

This has been an issue for the past couple of years when interpreting labour force data early in the year.

We show that the number of (seasonally adjusted) unemployed Australians still would have increased in January after accounting for unemployed future starters.

BUT the increase was much more gradual than the rise in the published measure of unemployment.

Similarly, we estimate that the recent weakness in published employment is overstated. But the underlying trend is a clear slowing in employment growth.

While our view remains that labour market conditions are slowly easing, January’s labour force data overstate the rate of that easing and some payback is a high possibility in the February release.