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Sunday 23

September, 201811:16 AM



Unemployment rate near 6-year low

Unemployment rate near 6-year low

Employment rose by 44,000 in August after a revised 4,300 fall in jobs in July (previously reported as a 3,900 fall in jobs).

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13.09.2018 06:59 PM

Jobless rate for young Aussies hits 7-year low
Labour force

Employment rose by 44,000 in August after a revised 4,300 fall in jobs in July (previously reported as a 3,900 fall in jobs). Full-time jobs rose by 33,700 and part-time jobs rose by 10,200. Economists had tipped an increase in total jobs of around 18,000.

Hours worked rose by 0.03 per cent in August and rose by 2.1 per cent over the year. Trend hours worked rose by 0.1 per cent in August and lifted 1.8 per cent over the year.

The unemployment rate was steady at 5.3 per cent in August. In trend terms the jobless rate eased from 5.4 per cent to 5.3 per cent – lowest since October 2012. The participation rate rose from 65.6 per cent to 65.7 per cent but was steady at 65.6 per cent in trend terms.

Unemployment across states in August: NSW 4.7 per cent (July 4.9 per cent); Victoria 4.8 per cent (5.0 per cent); Queensland 6.4 per cent (6.2 per cent); South Australia 5.7 per cent (5.7 per cent); Western Australia 6.4 per cent (6.0 per cent); Tasmania 5.8 per cent (6.3 per cent). In trend terms, Northern Territory 4.0 per cent (4.0 per cent); ACT 3.7 per cent (3.7 per cent).

Youth jobless: In trend terms the unemployment rate for 15-24 year old persons hit a 7 year low of 11.2 per cent. The jobless rate for 15-19 year old persons was at a 5-year low of 16.2 per cent. 

What does it all mean?

The job market remains in strong shape. More people are looking for work, more people are finding work and the jobless rate is slowly falling. The jobless rate is sitting near 6 year lows and there is good scope for it to fall further. Certainly the latest data from SEEK shows job ads up 5.4 per cent on a year ago and the latest NAB business survey also recorded a stronger result for employment. Both these measures are forward-looking, pointing to further job growth.

While a lift in jobs points to the potential for more spending in the economy, improving the confidence of those already in jobs, may have an even bigger impact on spending. Certainly household spending is currently growing at a 3 per cent annual pace – above the ‘normal’ growth rate recorded over the past decade. The falls in the under-employment rate and under-utilisation rate also suggest more people are happy with the hours being worked and therefore more disposed to spend.

The improvement in the job market is broad-based. More people are securing the hours of work they desire and the young person jobless rate has fallen to 7-year lows. The strong job market provides good support for retail and housing spending.

Not enough importance is placed on the workforce participation rate. The proportion of Aussies in jobs or looking for work is only a smidgen below all-time highs. If the participation rate was lower, arguably the jobless rate would also be lower. More people in the workforce suggests fewer people relying on government support, benefitting the budget bottom-line and permitting more money to be spent on other things like schools and hospitals.

What do the figures show?

Employment rose by 44,000 in August after a revised 4,300 fall in jobs in July (previously reported as a 3,900 fall in jobs). Full-time jobs rose by 33,700 and part-time jobs rose by 10,200.

Annual job growth stands at 2.5 per cent (decade average 1.6 per cent).

Hours worked rose by 0.03 per cent in August and rose by 2.1 per cent over the year. Trend hours worked rose by 0.1 per cent in August and lifted 1.8 per cent over the year.

The unemployment rate was steady at 5.3 per cent in August. In trend terms the jobless rate eased from 5.4 per cent to 5.3 per cent – lowest since October 2012. The participation rate rose from 65.6 per cent to 65.7 per cent but was steady at 65.6 per cent in trend terms.

Unemployment across states in August: NSW 4.7 per cent (July 4.9 per cent); Victoria 4.8 per cent (5.0 per cent); Queensland 6.4 per cent (6.2 per cent); South Australia 5.7 per cent (5.7 per cent); Western Australia 6.4 per cent (6.0 per cent); Tasmania 5.8 per cent (6.3 per cent). In trend terms, Northern Territory 4.0 per cent (4.0 per cent); ACT 3.7 per cent (3.7 per cent).

State/territory jobs: In seasonally adjusted terms, the largest increase in employment was in New South Wales (up 43,200), followed by Queensland (up 11,900) Western Australia (up 4,200). The largest decrease was in South Australia (down 8,400 persons) followed by Victoria (down 1,600) and Tasmania (down 300). In trend terms jobs in Northern Territory fell by 100 and ACT jobs rose by 100.

The working age population rose by 25,700 in August to 20.3 million. Over the year the working age population rose by 322,900 or 1.62 per cent, down from the record 2.36 per cent annual growth in December 2008.

The underemployment rate fell to a 4-year low of 8.1 per cent (seasonally adjusted) in August with underutilisation at a 5-year low of 13.4 per cent (seasonally adjusted).

In trend terms the unemployment rate for 15-24 year persons hit a 7-year low of 11.2 per cent. The jobless rate for 15-19 year persons was at a 5-year low of 16.2 per cent.

Why is the data important?

The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.

If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced. 

What are the implications?

The Aussie job market continues to tighten. Workforce participation is bumping up against the ceiling: the $64 question being how much it can rise further. If it is harder to fill positions, there will be further evidence of skill shortages, pointing to scope for higher wages to attract and retain the ‘right’ workers. Wage growth still has some way to go to prompt a lift in prices and therefore cause the Reserve Bank to question the need for higher interest rates.

The Victorian economy continues to out-perform with the jobless rate at fresh 7-year lows. Businesses located in that state have potential to ride the good economic fortunes. There are still challenges in the Western Australian and Queensland job markets with unemployment rates at 6.4 per cent

CommSec expects official interest rates to remain on hold until later in 2019.

Published by Craig James, Chief Economist, CommSec
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