Employment fell by 27,000 in June after a revised 27,900 (previously 38,900 in May). Economists had expected a flat result.
- In June part-time jobs rose by 6,600 after falling by 8,600 in May.
- Full-time jobs fell by 33,500 after rising by 36,400 in May.
- The unemployment rate rose from 5.1 per cent to 5.2 per cent in June.
- The participation rate eased from 65.4 per cent to 65.2 per cent.
- The number of hours worked fell by 1.2 per cent in June to be 1 per cent lower in annual terms.
- Unemployment across states and territories: NSW 5.1 per cent (5.0 per cent in May); Victoria 5.5 per cent (5.4 per cent); Queensland 5.3 per cent (5.7 per cent); South Australia 6.4 per cent (5.2 per cent); Western Australia 3.5 per cent (3.8 per cent); Tasmania 7.4 per cent (6.5 per cent); Northern Territory 4.2 per cent (4.1 per cent); ACT 3.6 per cent (3.6 per cent).
What does it all mean?
After singing out of tune for the past few months the job market is certainly back in line with the consistent sluggish performance of the broader economy. Western Australia is still shooting the lights out with a jobless rate of 3.5 per cent, but other states are struggling for momentum.
- In recent times an array of well publicised companies have gone into administration, yet the labour market data suggests that about 86,000 jobs have been created since the start of the year. The job market is very much a mixed picture – high profile job losses mixed in with job gains in key industries like mining and mining related services.
- The latest result confirms a similar view portrayed by the job advertisements series. Job ads have fallen for three consecutive months and are down almost 9 per cent on a year ago. And given that job ads are a leading indicator, it is likely that jobs growth will be much more subdued in coming months.
- Overall it is clear that employers aren’t keen to significantly add to their workforce and at the same time there isn’t enough demand for existing employees to work longer hours. Hours worked fell by 1.2 per cent in June – marking the biggest monthly fall in five months.
- Businesses have highlighted that confidence levels are poor and trading conditions are particularly tough. However the improvement in household budgets – due to the rate cuts and Federal government handouts – may just provide a lifeline for businesses over the next few months, particularly in the retail and service related sectors. If retail activity picks up, businesses will be more hesitant to lay off existing staff.
- The weak jobs result will be looked at closely by the Reserve Bank. However the central bank will be more focused on the current situation in the Euro Zone and even the slowdown in China. Any escalation of the Euro Zone debt crisis is likely to prompt the Reserve Bank to move sooner rather than later when it comes to rates. In our judgement – and even assuming Europe still muddles through in the next few weeks – the next interest rate cut is likely to occur in August. Policymakers should feel more comfortable about inflation after the release of the June quarter inflation figures on July 25, and the focus will then turn to further insulating Australia from the negative global news flow.
What do the figures show?
- Employment fell by 27,000 in June after rising by a revised 27,900 (previously 38,900) in May. Economists had expected a flat result. In June part-time jobs rose by 6,600 after falling by 8,600 in May. Full-time jobs fell by 33,500 after rising by 36,400 in May.
- The annual employment growth rate rose eased from 1 per cent to 0.4 per cent in June. The working age population rose by 19,500 in June after lifting by 19,700 in May. The working age population grew by 1.22 per cent over the past year – equal to the smallest gain in almost 12 years.
- The unemployment rate rose from 5.1 per cent to 5.2 per cent in June. The participation rate fell from 65.4 per cent to 65.2 per cent.
- The number of hours worked fell by 1.2 per cent in June to be down 1.0 per cent in annual terms.
- Unemployment across states and territories: NSW 5.1 per cent (5.0 per cent in May); Victoria 5.5 per cent (5.4 per cent); Queensland 5.3 per cent (5.7 per cent); South Australia 6.4 per cent (5.2 per cent); Western Australia 3.5 per cent (3.8 per cent); Tasmania 7.4 per cent (6.5 per cent); Northern Territory 4.2 per cent (4.1 per cent); ACT 3.6 per cent (3.6 per cent).Western Australia was the only state to record job gains in June (+1,000). Jobs fell the most in NSW (-14,600) followed by Queensland (-10,400), South Australia (-4,800), Victoria (-3,200), and Tasmania (-3,100). In trend terms employment fell in Northern Territory (-800) and rose in the ACT (+300).
What is the importance of the economic data?
- 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 for interest rates and investors?
- The rate cuts over the last couple of months will help to support activity in coming months and provide businesses with a bit more breathing space – especially given that trading conditions are difficult. However the downside risks to global growth – particularly the slowdown in China and ongoing Euro zone debt concerns – will ensure businesses still show a level of cautiousness.
- CommSec is pencilling in a quarter per cent rate cut in August, given the ongoing European debt concerns and the overall low inflation environment.
- As activity levels pick up over the coming year the Reserve Bank will focus more predominantly on wage costs and labour productivity.