Well, not good news from the labour market yesterday with the highest level of unemployment since the late 1990s the unemployment rate at a four year high and the key participation rate at a multi year low.
According to the August jobs report from the Australian Bureau of Statistics, the number of people unemployed in Australia hit a 15-year high in August, as the slowing resources investment boom and weak domestic demand in sectors such as retailing and the media hurt employment.
The ABS reported a second month of job losses across the board, with 10.800 full and part time jobs lost. That was after a revised 11,400 jobs were lost in July (compared with the originally reported 10.200). The seasonally adjusted jobless rate rose to 5.8%, which is the highest since 2009. On a trend basis the unemployment rate was steady at 5.8%, which tells us that the health of the jobs market continues to slowly worsen.
Unemployment at 15 year year high as jobs disappear
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Source: ABS, Bloomberg, AMP Capital
The news knocked the value of the Aussie dollar lower by 0.6 of a cent, to around 92.60.
Traders worried the weak jobs report might bring another rate cut from the Reserve Bank, but it won’t because the central bank is watching the developing boom in the housing sector, especially house prices and doesn’t want to add any more fuel to the sector through a further rate reduction.
But the stockmarket rose by around 7 points to a new five year high yesterday.
So with unemployment a lagging indicator (in that it tells the story well after the event has happened, such as job losses), there’s more unemployment on the way, with the jobless rate forecast to peak at 6.25%.
And this in turn will mean higher welfare payments and lower personal income tax revenues into 2014-15 for the new government (but higher stamp duty revenues for state governments from the property rebound) which will increase pressure on an already battered Federal Budget.
The saving grace for the economy is that policymakers such as the Reserve Bank and Federal Treasury see this as temporary, and are forecasting the economy to grow faster through 2014.
On the positive side, the ABS monthly seasonally adjusted aggregate hours worked series showed an increase in August, up 1.1 million hours to 1650 million hours, which indicates employers are still keeping people working rather than sacking them or pushing them into part-time work. Hours worked have risen 2% in the past year, which confirms the belief that employees are working longer and employers are not sacking people simply to cut costs quickly. They know that it can be cheaper to hang onto skilled labour in the long run.
The ABS reported a seasonally adjusted labour force participation rate decrease of 0.1 percentage points to 65% last month. That’s the lowest the rate has been since 2007. That means more people have left the work force or stopped looking for work.
The seasonally adjusted underemployment rate was 7.8% last month, and the ABS said that "combined with the unemployment rate of 5.8 per cent, the latest seasonally adjusted estimate of total labour force underutilisation was 13.7 per cent in August".
There were few standouts in the states. The main contribution to the higher national unemployment level was NSW, where unemployment rose 0.2 points to 5.9%, the highest since late 2009, although participation edged up there as well, always a good sign. Victoria was flat on 5.7% and Queensland moved from 5.9% to 6%, though there was a big fall in participation. South Australian unemployment fell 7.1% to 6.8%, helped by a fall in participation and the volatile WA numbers jumped from 4.6% to 5%, but with higher participation. Tasmania barely shifted, from 8.2% to 8.3%.
The AMP’s chief economist Dr Shane Oliver said in a note yesterday that the jobless rate is now just before its post GFC high of 5.9% (June 2009).
"In fact, if the participation rate were still at its June 2009 level of 65.5% the unemployment rate would now be 6.5%. The fall in the participation rate to now 65%, reflecting a combination of demographic forces as the population ages and more retire and workers leaving the job market after becoming disillusioned in the search for a job, has clearly had the effect of understating the true weakness in the jobs market over the last few years.
"The underlying weakness in the jobs market is also highlighted by a further rise in the labour force underutilisation rate to 13.7%, from 13% in May. This takes account of the unemployed and those who are employed but would like to work more hours.
"Australia’s jobs market is still much stronger than that in the US, but as can be seen the gap in the unemployment rate between the two countries is closing rapidly," Dr Oliver wrote. (See the above graph).
The US participation rate was 58.2% in August, the lowest since 1978, so many more people have stopped looking for work in the US, despite the recovery in the economy.
