Qld jobs market remains sluggish – unlikely trend unemployment rate fell last month

Unemployment_rate

Today’s labour force data from the ABS confirmed that the jobs market remains sluggish, with Queensland’s unemployment rate at 5.9 per cent in seasonally adjusted terms. Unfortunately, the ABS data aren’t very precise for Queensland and it’s hard to have a great deal of confidence in either the seasonally adjusted data, which are highly volatile as I’ve discussed before (Don’t read too much into one month’s unemployment figures – Qld data pretty volatile), or the trend data, which are based on a backward-looking data smoothing procedure that yields some weird results from time-to-time.

For example, the reported drop in Queensland’s trend unemployment rate to 5.7 per cent in December from 5.8 per cent in November is weird. Given the seasonally adjusted unemployment rate has been 5.9 per cent for the last six months, except for November when it dropped to 5.7 per cent before returning to 5.9 per cent last month, my best guess would be the trend unemployment rate is around 5.9 per cent. It’s probably been around 5.9 per cent for the last six months and the lower November figure simply reflects the volatility in the data series.

My guess is that the trend unemployment rate fell in December because the ABS’s data smoothing procedure is now giving less weight to the rogue June 2013 seasonally adjusted unemployment rate of 6.4 per cent than it did in previous months.  That is, I suspect the weird drop in the trend unemployment rate in December is due to the data smoothing procedure being compromised by the bad data point from June – another bad data point due to a too small sample of households from Queensland in the Labour Force Survey and consequently a high degree of sampling error and volatility in the data. It would be desirable for the ABS or Queensland Treasury to investigate whether this is the case. Also, it would be desirable for Queensland Treasury to delve a bit deeper into the ABS data it reports on in its information briefs, and to question whether the data it’s reporting on make sense or not.

Finally, while the jobs market remains sluggish, it’s still pretty reasonable by historical standards, particularly if you can recall the much higher unemployment rates in the 1980s and 1990s, as I’ve discussed in an earlier post:

Qld jobless rate not “historically high”

Other commentary on Queensland’s labour market can be found at:

Weak jobs data but QLD bucks the Trend

Oh No Victoria!

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2 Responses to Qld jobs market remains sluggish – unlikely trend unemployment rate fell last month

  1. Gene,
    Some good points but I have to disagree with your central theme that the Trend rate in QLD is “weird”. In fact the Trend UR has been on a (very) gradual decline since July 2013. The Dec fall to 5.7% was actually only a tiny decline of 0.048% and therefore very much in line with the small declines witnessed over the past 6 months.
    Trend employment levels have increased every month for the last 8 (and in 14 of the last 15 months!); nationally it’s fallen for the past 7 months. Trend employment in QLD now stands at a level 1.5% higher than in Dec 2012. Although that is hardly a stellar performance, it is significantly better than the national performance of just 0.4%.
    I would certainly agree with your call for the ABS and/or QLD Treasury to look into the quality of the QLD data.
    Pete

  2. Gene Tunny says:

    Thanks Pete. Good point about the magnitude of the change being tiny, which I should have picked up. I’m still unhappy with the trend rate though. It’s telling us the unemployment rate is slowly going down when my reading of the data is that its been stuck just below 6 per cent for the last six months. I might investigate what the point of the ABS’s trend estimate is anyway. Given it’s just a moving average filter I’ve always worried it’s a bit naive.

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