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Feature Article - Investigations of Volatlity in the Labour Force Survey
GRAPH 1: EMPLOYED PERSONS, AUSTRALIA, DISTRIBUTION OF RELATIVE IRREGULARS
GRAPH 2: UNEMPLOYED PERSONS, AUSTRALIA, DISTRIBUTION OF RELATIVE IRREGULARS
MAGNITUDE OF THE IRREGULARS OVER TIME
The graphs of irregulars in the feature article (Graphs 3 and 4) show them as being equally scattered above and below zero. This is inevitable, as over time they must average out to zero. It is of interest to consider the magnitude of the irregulars, and to ask: ignoring whether they are positive or negative, have the standardised irregulars become bigger or smaller over time?
Graphs 3 and 4 show the absolute values of the relative irregulars i.e. they show the magnitude of the irregulars, relative to the estimate, without regard to sign. The horizontal line on each graph shows the average magnitude of the relative irregulars over the whole span of data. For employed persons, the average size of the relative irregulars has been about 0.16%, looked at over the whole period of the survey. For unemployed persons, the average size of the relative irregulars has been about 1.25%.
These graphs support the view that there has been no observable deterioration in the stability of the LFS estimates over time. If there had been, there would be a clear pattern of values below the average early in the life of the survey, and above the average in more recent times. This does not occur, for either employed or unemployed persons.
Another feature is drawn out by this presentation. Throughout each series there have been ‘quiet’ episodes, lasting for periods of around six to nine months, where the volatility of the survey has been below the average, followed by slightly shorter ‘noisier’ periods, where the volatility has been above the average.
This effect may contribute to occasional concerns in the public arena that LFS estimates are becoming more volatile. This may be the appearance in the short term, when a period of relative stability has been followed by a more volatile period. In the longer term, however, both the employed persons and unemployed persons series have shown no overall increase in volatility.
GRAPH 3: EMPLOYED PERSONS, AUSTRALIA, MAGNITUDE OF RELATIVE IRREGULARS
GRAPH 4: UNEMPLOYED PERSONS, AUSTRALIA, MAGNITUDE OF RELATIVE IRREGULARS
A major contributor to the volatility of the survey estimates is the sampling error. Sampling error is an unavoidable part of any survey, arising because only a portion of the population is surveyed in any month. Assuming negligible survey bias, the effect of sampling error on survey estimates can be written as
Survey estimate = True population value + Sampling error
The sampling error on estimates will be approximately normal for theoretical reasons, so it is not surprising that the irregulars appear normal. For further discussion of sampling errors in the LFS see Labour Force, Australia (6203.0).
The following conclusions can be drawn about the volatility of the Labour Force estimates of employed persons and unemployed persons. First, the irregulars are approximately normal in distribution. Second, the magnitude of the irregulars is not increasing appreciably over time. Third, there is a tendency for the irregulars to show periods of low volatility separated by shorter periods of higher volatility.
Philp Bell is Acting Director of the Statistical Support Section, ABS. For further information on this Technical Note, contact Philip on telephone (06) 252 7306.
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