Surprise, surprise! Even though the Land Down Under is in the middle of an economic slowdown, the latest jobs report printed incredibly positive results. For the month of May, Australia added 42K jobs and brought its jobless rate down from 6.1% to a one-year low of 6.0%. Are these headline numbers too good to be true?
1. Not much weakness in underlying data
If you’ve been keeping track of economic releases for quite some time, then you’ve probably made it a habit to dig deeper into the underlying data to see if there are weak spots not visible on the surface level.
The usual culprit in sudden declines in the unemployment rate is the participation rate, which tracks if people are exiting the labor force and giving up on their job hunt. However, this wasn’t the case this time, as Australia’s labor force participation rate held steady at 64.8%.
Another factor typically put in question is the quality of jobs, as a sudden increase in part-time workers could offset potential declines in full-time hiring and result in an overstated headline employment change reading. Again, this wasn’t the case this time, as full-time positions increased 14.7K in May (still above the consensus of a 12.1K overall employment gain) while part-time hiring picked up by 23.7K.
So if the participation rate was unchanged and full-time employment increased, could this mean that Australia’s latest jobs report is really reflecting a stellar rebound? Let’s do a bit more digging, shall we?
2. We’re seeing some serious cuts in the ABS…
Nope, not bragging about the results of my new workout regimen right here. I’m referring to the budget and personnel cuts that the Australian Bureau of Statistics (ABS) has been undergoing… although I must add that I’m seeing less of a “dad bod” in the mirror these days.
Anyway, a few months back, the Australian Bureau of Statistics (ABS) announced some adjustments in their employment survey methodology, leading forex market watchers to take the results with a grain of salt and put the organization under the microscope. Because of that, several analysts were able to discover that the ABS lost roughly 350 members of its staff in the past few years and suffered a budget cut of 68 million AUD last year.
This definitely casts doubt on the reliability of the recent jobs numbers, as the agency has had fewer personnel conducting monthly employment surveys and working longer hours to crunch the numbers. Heck, I wouldn’t be surprised if a few mistakes were made here and there since the ABS couldn’t even afford to have a chief statistician oversee its operations!
3. Significant downgrade in April data
Lastly, another thing worth noting from the latest jobs release is that it also featured a pretty hefty downgrade on the previous month’s data. From an initially reported 2.9K drop in employment last April, the figure was revised to show an even larger 13.7K decline in hiring.
This pattern of seeing notable revisions in previous data has been going on for quite some time, as the folks over at the ABS are probably scrambling to meet the deadline for the monthly jobs release only to realize much later on that a bunch of adjustments need to be factored in.
Judging by AUD/USD’s lack of follow through after its initial reaction to the report, most forex participants don’t seem to be buying the upside surprise in the May data and might be inclined to wait for future revisions.