The unemployment rate eased from 5.2 per cent to 5.1 per cent in August. The participation rate eased from 65.2 per cent to a near 6-year low of 65.0 per cent.
What does it all mean?
There is something for everyone in the latest jobs data. The optimists could focus on the lower jobless rate and conclude all is fine. The pessimists would look at the fall in jobs, the participation rate and hours worked and conclude something more sinister.
In truth though, the job market is softening, but only gradually. Employers aren’t keen to hire unless they have to, given the global uncertainties. But while jobs are being lost in some industries, clearly they are being created in other industries.
The unemployment rate is down because more people gave up the search for work than those who lost jobs in the month. And that is the main area of concern in the latest jobs report. A smaller proportion of people are in the workforce – people in jobs or are looking for work – with the participation rate at 6-year lows. Reasons for this trend must be identified and corrected.
For many, today’s jobs figures are still reasonably encouraging given all the anecdotes of jobs being lost. The truth is that job losses are reported, and reported on page 1, but job gains aren’t reported, or if they are, it is on page 32.
The Reserve Bank must stand poised to cut rates as necessary. But the latest jobs data is no smoking gun.
The job market has softened, but not dramatically. In fact for those in NSW, the jobs data is quite encouraging. Employment rose by 3,300, while the jobless rate fell to 4.8 per cent. NSW – the new powerhouse economy – who knew?
What do the figures show?
- Employment fell by 8,800 in August after a revised gain of 11,700 in July (previously +14,000). It was only the second fall in jobs in six months. Economists had expected 5,000 jobs to be added.
- Part-time jobs fell by 9,300 after rising by 4,100 in July. Full-time jobs rose by 600 after rising by 7,600 in July.
- The annual employment growth rate stood at 0.5 per cent in August, a five-month low. The working age population rose by 22,500 in August after lifting by 22,300 in July.
- The working age population grew by 1.29 per cent over the past year – the fastest rate of growth in 12 months.
- The unemployment rate eased from 5.2 per cent to 5.1 per cent in August. The participation rate eased from 65.2 per cent to a near 6-year low of 65.0 per cent (lowest since November 2006).
- The number of hours worked fell by 0.4 per cent after rising by 0.8 per cent in July to be 0.7 per cent lower in annual terms.
- Unemployment across states and territories: NSW 4.8 per cent (5.2 per cent in July); Victoria 5.6 per cent (5.4 per cent); Queensland 5.9 per cent (5.8 per cent); South Australia 5.7 per cent (5.4 per cent); Western Australia 3.9 per cent (3.7 per cent); Tasmania 6.8 per cent (6.5 per cent); Northern Territory 4.2 per cent (4.2 per cent); ACT 3.6 per cent (3.6 per cent).
- Western Australia recorded the biggest job gains in August (+6,900), followed by Queensland (+5,700), NSW (+3,300) and Tasmania (+1,200). Jobs fell the most in Victoria (-14,800) followed by South Australia (-9,000). In trend terms employment rose in the ACT (+400) and rose by 300 in the Northern Territory.
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 job market is flat, and the lead indicators such as job advertisements suggest that there is little improvement on the horizon. It is more likely that the job market will soften a little further in coming months, and that could prompt the Reserve Bank to cut rates. The working age population is growing, meaning that it will take more jobs to be created to prevent the jobless rate from rising.
Investors should be careful about following the headlines, without digging further to determine if they have the true picture. While some businesses are paring back staff, others still complain that it is hard to attract and retain good people.