An extraordinary story (HT: Peter Martin) from experienced journalist, Tim Colebatch, in The Age today explaining how, "official jobs figures published by the Bureau of Statistics have significantly underestimated recent job growth, due to forecasting errors." Colebatch pushes on with evident frustration, writing that the ABS has:
"[S]eriously misled readers, commentators and ultimately the public, about the size of the slowdown in the jobs market — and hence, the true state of the economy. One prominent commentator seized on the reported fall in jobs to describe the labour market as being in its worst shape since 1992..."
Most interestingly, Colebatch quotes an unnamed--presumably government--source who says, "Once the figures are adjusted for the erroneous forecasts, at least 100,000 of the jobs supposedly created in 2010 in fact arrived in 2011."
So all the high-profile commentators and analysts you have read who claimed there was zero jobs growth in 2011, and that the RBA should cut interest rates to support an anaemic employment market (and indeed focus more on the employment goals in its antiquated 1959 Act), were, putting it diplomatically, misguided.
Colebatch himself has been a vocal advocate of more accommodative monetary policy on the basis of sub-trend economic growth and soft tradeables inflation. Only yesterday he was telling readers to ignore the superficially strong 4.9% jobless rate because it was "very likely" that Australia's unemployment rate would head to 5.5%.
But don't expect to see too many view-changes. Those many and varied stakeholders gunning for lower interest rates are much more influential, vocal, and visible than the silent savers that want positive inflation-adjusted returns.
With the benefit of Harry Hindsight, would the RBA have cut rates four times had it had this information? I personally doubt it. The public ammunition would not have existed. So perhaps there is a lesson here for the central bank: don't over-engineer policy. Let the economy work through its short- to medium-term volatility.
