LABOUR FORCE COMMENTARY SEPTEMBER 2014


REVISED SEASONALLY ADJUSTED SERIES

The seasonal pattern previously evident for the July, August and September labour force estimates is not apparent in 2014. As there is little evidence of seasonality in these months for 2014, the ABS has decided that for these months the seasonal factors will be set to one (other than for the monthly aggregate hours worked series). This will result in revised seasonally adjusted (and trend) estimates for July and August 2014.


NATIONAL ESTIMATES

Australia's unemployment rate increased 0.1 percentage points to 6.1% in September 2014 (seasonally adjusted). The number of unemployed persons increased by 11,000 to 746,600 in September 2014 (seasonally adjusted).

In trend terms the unemployment rate remained steady at 6.0% in September 2014. The number of employed persons in September 2014 increased by 5,600 to 11,604,900 and the number of unemployed persons increased by 4,600 to 745,500 in trend terms. The trend participation rate remained steady at 64.6% in September 2014.

September 2014 saw the seasonally adjusted participation rate decrease 0.2 percentage points to 64.5%.

The seasonally adjusted number of employed persons decreased by 29,700 in September 2014 to 11,592,500 persons following a revised increase of 32,100 persons in August 2014. The decrease in September was driven by part-time employment. The employment to population ratio, which expresses the number of employed persons as a percentage of the civilian population aged 15 years and over, decreased 0.2 percentage points (based on unrounded estimates) to 60.6% (seasonally adjusted). In trend terms, the employment to population ratio decreased less than 0.1 percentage points to 60.7% (based on unrounded estimates).

Seasonally adjusted full-time employment increased by 21,600 persons to 8,028,900 persons while part-time employment decreased by 51,300 to 3,563,600 persons in September 2014. The decrease in total employment resulted from:

• a decrease in female part-time employment, down 31,600 persons
• a decrease in male part-time employment, down 19,700 persons
• an increase in female full-time employment, up 8,200 persons
• an increase in male full-time employment, up 13,400 persons.

Seasonally adjusted aggregate monthly hours worked decreased 15.0 million hours (0.9%) in September 2014 to 1,591.3 million hours.


STATE ESTIMATES

The largest absolute decreases in seasonally adjusted employment were in Queensland (down 17,200 persons), South Australia (down 4,300 persons) and New South Wales (down 4,100 persons). The largest absolute increase in seasonally adjusted employment was in Western Australia (up 4,000 persons).

The largest decreases in the seasonally adjusted participation rate were in Queensland (down 0.7 percentage points) and Victoria (down 0.2 percentage points). The largest increases in the seasonally adjusted participation rate were in South Australia (up 0.2 percentage points) and Western Australia (up 0.2 percentage points).

Seasonally adjusted estimates are not published for the territories.

Unemployment rate, State and Territories, August 2014 and September 2014
	Trend		Seasonally Adjusted
	August	September	August	September
	%	%	%	%
New South Wales	5.7	5.7	5.6	5.8
Victoria	6.6	6.7	6.7	6.7
Queensland	6.3	6.4	6.4	6.3
South Australia	6.5	6.3	5.7	6.5
Western Australia	4.9	4.9	4.8	5.0
Tasmania	7.2	7.2	7.0	7.4
Northern Territory	4.4	4.3	np	np
Australian Capital Territory	4.4	4.6	np	np
Australia	6.0	6.0	6.0	6.1
np not available for publication but included in totals where applicable, unless otherwise indicated

ABOUT THE DATA - REVISED SEASONALLY ADJUSTED SERIES

The ABS has concluded that the seasonal pattern previously evident for the July, August and September labour force series is not apparent in 2014. This assessment relates to all seasonally adjusted series other than the aggregate monthly hours worked series.

Over recent months key labour force series, when seasonally adjusted using previously observed seasonal factors, have exhibited unusual volatility. In the August 2014 issue of this publication, the ABS reported on investigations that it had undertaken into this volatility. At that time, no systematic cause was identified. However, in processing the September 2014 labour force estimates, the absence of previously observed seasonal movements in the original estimates became pronounced, leading to the conclusion that the seasonal factors based on past observations were not appropriate for July, August and September 2014.

The ABS has been unable to determine a definitive cause of this change in seasonality. It could have resulted from one or more factors including changes in ‘real world’ labour market behaviour, changes in the timing and content of the supplementary survey program (run in conjunction with the Labour Force Survey), the introduction of web-forms, the introduction of the new labour force questionnaire, or refinements to collection procedures.

Given the sudden shift away from the usual seasonal patterns, the ABS has determined that the usual seasonal adjustment process, based on patterns in previous years, is not appropriate for application for the most recent months’ estimates.

Because there is little evidence of noticeable seasonality in key series in recent months, the ABS has chosen to set adjustment factors to one (reflecting no seasonality) for the Labour Force series (other than aggregate monthly hours worked) for the past three months i.e. July, August and September 2014. This has resulted in revisions to the seasonally adjusted estimates (and, as a consequence, trend estimates) for July and August 2014. The trend series, which reduce the impact of the irregular component of the seasonally adjusted series, can provide a better basis for analysing the underlying behaviour of the series. The original series have not been revised.

Overall, setting the seasonal adjustment factors to one for July, August and September 2014 has removed excessive volatility from the Australian level seasonally adjusted series, although the impact varies from series to series and month to month. The same process was applied to all seasonally adjusted series (other than the monthly aggregate hours worked series), including lower level aggregates by state and age, and affected series in the detailed monthly and quarterly releases. As the movements in the underlying original data may be more variable at these levels of disaggregation, more variability in the seasonally adjusted series may be observed than in the Australia level series.

Standard seasonal adjustment has been retained for the aggregate monthly hours worked series as the seasonality in this series is mainly driven by the effect of holidays and the usual seasonal patterns do not appear to have changed.

The ABS appreciates that the production of high quality Labour Force series is essential for understanding the economic and social impacts of changes in the labour market. The ABS will initiate a review into the series to ensure that high quality estimates continue to be produced. The ABS intends to seek independent expert advice to assist with the review and will release the outcomes of the review.


ADDITIONAL INFORMATION

What would the seasonally adjusted estimates for September have been if the seasonal adjustment factors had not been set to one?

If the ABS had not set the seasonal adjustment factors to one, the seasonally adjusted estimate of total employed persons for Australia would have declined by approximately 172,000 persons between August and September 2014. The published estimate is a decrease of 29,700 persons. The seasonally adjusted participation rate would have decreased by 1.0 percentage points. The impact on the other key series for September is not as significant. The seasonally adjusted estimate of total unemployed persons for Australia would have declined by 7,000 persons between August and September 2014 with the published estimate increasing by 11,000 persons. The seasonally adjusted unemployment rate for Australia would have remained steady at 6.1% with the published estimate increasing by 0.1 percentage points to 6.1%.

What revisions were made to the estimates for July and August 2014?

The original estimates for July and August 2014 have not been revised. The revisions made to the key seasonally adjusted estimates for Australia are shown in the table below:

	Employed persons ('000)		Unemployment rate (%)		Unemployed persons ('000)
	As published in the August issue	As revised in the September issue	As published in the August issue	As revised in the September issue	As published in the August issue	As revised in the September issue
June 2014	11 586.6	11 578.2	6.1	6.0	746.7	741.3
July 2014	11 582.5	11 590.1	6.4	6.0	788.5	743.0
August 2014	11 703.5	11 622.2	6.1	6.0	755.1	735.5

The trend estimates were revised as a consequence of revisions to the seasonally adjusted series.

Why didn't the ABS introduce this seasonal adjustment treatment in July or August 2014?

The ABS investigated the estimates produced in July and August 2014 (for details refer to the July and August issues). While the movements between June and July 2014 for the seasonally adjusted Australian unemployment rate and participation rate were unusual they were not unprecedented in the series. The movements between July and August 2014 for the seasonally adjusted Australian employment series, especially part-time employment, were very large but again were not unprecedented. However, if the previously observed seasonal factors had been applied to September, there would have been an unprecedented movement in full-time employment. Cumulative evidence from these three months identified that maintaining the standard approach was not appropriate.

Why did the ABS set the seasonal factors to one (ie no seasonality)?

A break in a seasonal pattern can normally only be measured with a minimum of three observations (e.g. July data for three years). However, the data for July to September 2014 showed that the Labour Force series had appeared to shift away from their usual seasonal patterns. As this had not impacted the same series by the same magnitude each month it was not possible to identify alternative seasonal factors. Furthermore, setting the seasonal factors to one have produced series that are substantially less volatile than would otherwise have been the case.

Why did the ABS implement changes to the Labour Force program?

In late 2010, the ABS commenced a review of its labour household surveys program. The review aimed to improve the relevance of data released, maximise the coherence of interrelated topics, minimise the duplication of content and ensure the collection remained cost effective. It had been many years since the ABS undertook a holistic review of its labour household surveys program; many of the current labour surveys have origins in the 1970's and 1980's, and as a result they, to some extent, reflected an outdated view of work and the labour market. A holistic review was needed to ensure ABS labour statistics continue to reflect international standards and deliver high quality, coherent, conceptually robust and relevant statistics into the future. Implementing any change to a series like the Labour Force has some risks but change is needed to ensure that the series remains relevant. It was not possible to put in place an approach to measure the impact of most these changes.

How will future months be treated?

The ABS will continue to quality assure estimates produced from the Labour Force series and will initiate a review into the series to better understand why the series appear to have shifted away from their usual seasonal patterns. Although estimates for October have not traditionally exhibited strong seasonality (and therefore have seasonal factors close to one), it is not ideal to maintain the current treatment for an extended period. The treatment in October and future months will depend on the estimates produced, the continuation of the current investigations and the outcome of the review.

How should the seasonally adjusted series be interpreted?

The original Labour Force series reflect the information provided by householders to the Labour Force Survey weighted to add to independent estimates of the civilian population aged 15 years and over. While the original series may reflect (within standard errors) what has actually occurred in the economy (e.g. change in number of persons employed), it can be difficult to interpret movements in monthly series, in original terms, because the results can reflect seasonal effects (e.g. the seasons or holidays like Christmas). The seasonally adjusted series removes these seasonal effects and provides a better basis for interpreting month to month movements. The trend series reduces the impact of the irregular component of the seasonally adjusted series and can provide a better basis for analysing the underlying behaviour of the series.