Following stronger than expected employment data, the Australian dollar (AUDUSD) has soared back above 90 US cents, or as the RBA likes to call it ‘uncomfortable territory’.
The Aussie jumped as high as US 90.77 cents after the Australian Bureau of Statistics (ABS) released the data. According to the ABS, 47,300 net new jobs were added to the economy in February, well above expectations of 15,000, and the biggest rise in nearly two years according to AAP.
But FX traders may have read too much into the announcement. The unemployment rate remains at 6.0%, and there’s another catch says AAP.
It seems the ABS drops one eighth of the households in its survey sample, and adds another group of households to replace it. As a result, random samples may have more employed people, fewer retirees or vice versa. That makes month-to-month numbers volatile, and can jump or drop depending on the data in the sample.
As the ABS notes,
“This incoming rotation group contributed, in original terms, 37 per cent of the increase in total employment and 29 per cent of the decrease in persons not in the labour force in February 2014″.
As a result AAP says adjusting the numbers to account for that effect would have resulted in virtually no change to the unemployment numbers, and more likely a marginal fall.
While the unemployment rate stayed at 6.0%, AAP says the unemployment rate came within a whisker of being upgraded to 6.1%. How small you ask? Less than three thousandths of a percent.
The unemployment level is slowly creeping up. Don’t be surprised if economists get next month’s result wrong either, if they take February’s result into account.
Rising unemployment is bad news for banks. But at this stage investors appear unaware of the risks that could suddenly engulf the big four banks of ANZ Bank (ASX: ANZ), Commonwealth Bank (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC). Bank shareholders, you have been warned.