Since I have been short the AUD for the past 2.5 years I have been watching the news from China/Australia every morning (here for instance) with great interest. Given my bearish view on China and seeing it slowly being accepted by the consensus, I think the AUD has further to fall – nothing has really happened yet! Thus I was surprised when I switched on my computer this morning to learn that the jobs number down under came in way better than expected. Here is the FT for more color:
(…) Thursday’s data, which showed 58,600 jobs were created in October, beating expectations of 15,000, looked to quash any further talk of a rate cut and pointed to resilience in the economy in the face of the slowdown in China, Australia’s biggest trading partner. It took the unemployment rate to 5.9 per cent, a shade under the RBA’s forecast range of 6 per cent to 6.35 per cent that was issued just last week (…)
How can this be, especially given the recent news about collapsing exports in South Korea and the Philippines as a result of the China slowdown? If anything, the commodity bear market has gained traction over the past months.
I was immediately reminded of the events in April when a similarly good jobs report resulted in a 6 percent gain in the AUD and caused great losses for Crispin Odey, the famous macro manager. Here is what I wrote back then,
(…) To be honest: I have no clue why the job data for February came in much better than expected. Macro data are backward looking anyway and do not help much in assessing future outcomes. Interestingly, the RBA also doesn’t believe that this is sustainable, since they did cut the benchmark rate further (…)
Yeah, right: single point “real-time” Macro data are should not be relied upon too much, especially when the outcome is completely counterintuitive.
Now I learn on Zerohedge (here), that there have been serious questions about the data quality of the seasonally adjusted jobs number in the past,
(…) The ABS is itself cautions against placing too much credence on the monthly figures, which are based on a changing sample, particularly the seasonally adjusted data. The statistician encourages people to focus on the trend estimate (which had the unemployment rate unchanged).
And, after a series of stuff ups, revisions and methodological changes over the past year, there is even more room for caution.
Last year, the ABS was forced to abandon seasonally adjusted labour force numbers for a period after conceding they were unreliable. The former chief statistician recently said the data was not worth the paper it was written on (…)
Lesson: it is probably not just China massaging the numbers that are most watched…
Disclosure: short CNY, short AUD