With the huge volatility in State unemployment rate estimates, demonstrated by the ABS seasonally adjusted estimate of Queensland’s unemployment rate falling from 6.4% in January to 5.6% in February, and the SA rate increasing from 6.8% to 7.7%, the ABS really needs to invest greater resources into generating better State-level estimates. I did my best to explain what the latest labour force data mean for Queensland to the Courier-Mail yesterday (see Qld February 2016 unemployment rate adjusted to 5.6%):
Economist Gene Tunny, from Adept Economics, said southeast Queensland was cracking ahead while regional areas were struggling.
He said while the volatile figures were hard to read, there definitely was a continuing trend in jobs growth.
“Gold Coast is going well with the Commonwealth Games and Brisbane with construction but other areas have the loss of the resources industry,” he said. “Overall, I think the state economy is really a bit lacklustre.”
On yesterday’s figures, I would highly recommend Paul Syvret’s excellent column in today’s Courier-Mail, in which he too expresses concern about the reliability of the data (Qld unemployment data for February 2016 explained):
The problem we have right now is that the labour force data is wildly erratic, making it hard for policy makers to get a handle on what is actually happening in the real economy.
The volatility in the State-level estimates should add to concerns about the reliability of the national seasonally adjusted unemployment rate, which is a key indicator monitored by the Reserve Bank in advising on monetary policy. The ABS may promote its trend estimates, but they are poor substitutes for reliable seasonally adjusted data. As I have noted before, the trend estimates are simply smoothed, filtered versions of the underlying seasonally adjusted data, and the trend estimates will tend to disguise turning points that may be occurring, because they are smoothing the time series. Eventually the trend data will be revised, and turning points will be revealed, but analysts will miss the turning points when they really need to see them if they rely on the trend data alone.