Australian jobs growth back to earth in January
After three months of unbelievably strong jobs growth (101,000 new jobs were created between September and December last year), employment fell back in January with a loss of 12,000 jobs with the falls concentrated in full time employment.
The fall in employment combined with an unchanged labour force participation rate saw unemployment rise from 6.1% to 6.4%, its highest since June 2002.
Over the last year unemployment has drifted up from 6% to 6.4%.
While employment rose by 185,000 over the last 12 months, this has not kept pace with the labour force which expanded by 223,000 and so the trend in unemployment remains up.
Forward looking indicators of the jobs market – such as ANZ job ads and the employment component of the NAB survey – point to jobs growth ahead but for the next six months or so it’s unlikely to be strong enough to prevent a further rise in the unemployment rate.
We had thought unemployment would peak at 6.5% this year, but that is at risk of proving too optimistic.
The change in the relative fortune of the Australian economy compared to the US is clearly evident in the chart below. While Australian unemployment has been trending up since 2011, that in the US has been trending down and it’s now clearly below that in Australia.
Our view remains that the RBA will cut interest rates again in the months ahead, and the rising trend in unemployment is consistent with that.