Thursday, 13 February 2014

The perils of economic predictions proved again

You have to wonder why Australian banks continue to employ economic spokespeople to make fools directly of themselves and indirectly of their employer. Just what is the benefit to anyone of the succession of misleading prognostications? And why does the media think it necessary to report the nonsense?
Take this example this morning just an hour or two before the Australian Bureau of Statistics released its official figures.
Unemployment expected to hold steady on rising business confidence
By finance reporter Elysse Morgan
Today’s official employment data is widely expected to show unemployment remained at 5.8 per cent last month.
Economists believe 15,000 jobs will have been added, which would only make up for some of the 22,500 thousand jobs that the ABS currently estimates were lost from the economy in December.
December’s figures were the biggest loss in full-time jobs in two-and-a-half years.
The Reserve Bank believes the jobless rate will continue to rise over the coming months to reach 6 per cent, but some economists believe a pick-up in business confidence and conditions will flow through to hiring.
HSBC Australia chief economist Paul Bloxham is one of those who believes the report will show a pickup in employment.
“Part of this reflects that we saw such a weak result in December that we’re expecting bit of a bounce back in January, but also we are broadly optimistic that the labour market is going to start to show some signs of improvement soon because growth in the economy looks like it was rebalancing in the fourth quarter of last year,” he said.
Mr Bloxham says he believes the unemployment rate is unlikely to rise much higher.
“Look we think growth is already rebalancing, we’ve seen a pickup already in the housing sector, a pickup in residential construction, we think that’s flowing through to business confidence and business conditions, and very soon we think firms will start to hire to meet that rising demand,” he added.
Westpac chief economist Bill Evans says a positive reading is needed to turn around rising concerns about job security, which are affecting consumer confidence and spending.
“We have to go back a long way before we can see people feeling as concerned about the outlook for unemployment, so we need to settle that down, they need to feel more confident about job security,” he explained.
And so to those official ABS figures.
  • Employment decreased 3,700 to 11,459,500. Full-time employment decreased 7,100 to 7,953,000 and part-time employment increased 3,400 to 3,506,500.
  • Unemployment increased 16,600 (2.3%) to 728,600. The number of unemployed persons looking for full-time work increased 20,700 to 547,200 and the number of unemployed persons looking for part-time work decreased 4,100 to 181,400.
  • The unemployment rate increased 0.1 pts to 6.0%, based on unrounded estimates.
  • Participation rate unchanged at 64.5%.
  • Aggregate monthly hours worked increased 20.5 million hours to 1,635.8 million hours.

A sign that the unemployment position is worse than shown by these seasonally adjusted figures is shown in this plot of the employment to population ration of 15 to 64 year olds that takes out the influence of the ageing population on the declining participation rte.

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