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Economists wrestle with tricky jobs data

AAP logoAAP 21/10/2016 Garry Shilson-Josling, Economist

In his first speech as Reserve Bank governor, Philip Lowe described the labour market picture as "mixed" and official figures two days later backed his description to the hilt.

It was a tricky set of figures.

Unemployment fell slightly, but so did employment, in a combination that seems contradictory but pops up on average about one month in two.

Commonwealth Bank senior economist John Peters acknowledged the weirdness of the monthly figures, adding a warning to the title of his report: "handle monthly data with care!"

He pointed to the dominance of part-time employment in the past year's jobs growth, and the spare capacity in the jobs market signified by a record high underemployment rate - the proportion of the labour force with a job but wanting to work more hours.

It underscored the increasing casualisation of the workforce.

"And it underpins both incredibly weak wages growth and below target inflation even as the trend unemployment rate continues to grind lower," Mr Peters said.

Even so, he warned the monthly falls in both employment and the participation rate over the past two months suggest the level of employment may be underestimated.

"So the bottom line is to take the latest headline jobs prints with a grain of salt," Mr Peters said.

Of course, the same warning would apply given an alternative explanation - that the earlier figures had overstated employment growth.

In any case, the consensus was that the figures signalled weakness in the labour market despite the uncertainties inherent in monthly estimates.

Westpac's Justin Smirk singled out the role of declining male participation in the labour market over the past year, something he put down to disillusionment among jobseekers, as a factor in holding the unemployment rate down.

"As such, even though the September release was associated with a decline in the unemployment rate it should be considered a soft update on the Australian labour market," he said.

Tom Kennedy, economist at JP Morgan, said there was nothing in the figures to change his view that the unemployment rate is understating the degree of slack in the labour market, pointing to softness evident in other measures like the underemployment rate, average working hours, and the steep slide in participation so far this year.

"This weakness is also reflected in the employment to population ratio, which slowed further to 60.9 per cent and unwinds the upturn seen in the past year," Mr Kennedy said.

Royal Bank of Canada's Michael Turner pointed to doubts over the quality of the survey data, with even the Australian Bureau of Statistics taking the unusual step of tweaking the estimates to reduce the impact of a group of households in Queensland newly added to the survey.

"In short, it appears the ABS is struggling to take survey responses at face value, and is almost ignoring some of them," Mr Turner said.

Even so, his view was in line with the assessment made by other economists.

"September's employment report was soft," he said.

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