There were no ‘smoking’ guns or obvious pointers about the health of the jobs market and the economy in January’s employment report yesterday – except to say it remains as confused and uncertain as the Reserve Bank suggested it was when it cut interest rates at the start of the month.
The rise in the jobless rate in January to a 12 year high of 6.4% reversed the surprise fall in December to 6.1% from 6.2% in November. But we have to be cautious about the rise and the loss of 12,000 jobs (seasonally adjusted). There are a couple of factors that will soften the ostensibly bad headline news.
Firstly, the fall came after three months of strong jobs growth which saw 101,000 new jobs were created between September and December last year.
But the participation rate remained steady on December’s level, the number of hours worked rising and the number of people looking for work rising – which usually indicates rising confidence among those not in the work force.
Adding to the need for caution about the jobs data was the number of jobs added to the economy in December being revised upwards from 37,400 to 42,300. A downward revision would add to any feeling the jobs data for January showed a weakening demand for labour.
While the last year saw unemployment has drifted up from 6% to 6.4%, employment rose by 185,000 over the last 12 months. But this has not kept pace with the labour force which expanded by 223,000 and so the trend in unemployment remains up.
Unemployment print disappointing, not disastrous
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But 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 the AMP’s chief economist, Dr Shane Oliver says that, "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," he wrote yesterday.
Driving the fall in employment was a seasonally adjusted 28,100 drop in full time employment, which more than offset a 15,900 rise in part time jobs. Unemployment rose 34,500 to more than 795,000. The participation rate was steady on 64.8% and the number of hours worked rose 0.5%.
On a trend basis, the jobless rate was steady on 6.3%, the participating rate was steady on 64.7%, the number of people employed rose fractionally, (200 people), while the number of people unemployed was up around 5,000 to 782,000.
There was a 0.3 point rise in unemployment in NSW to 6.3%, where participation dropped 0.1 of a point. It dropped by the same in Victoria, where unemployment rose to 6.6% from 6.5%. In Queensland, the final legacy of the Newman government was a 0.3 point rise in unemployment to 6.5%, off the same small fall in participation as in NSW and Queensland.
South Australia saw a big rise in unemployment, from 6.6% to 7.3%, (but the numbers in smaller states are always more volatile, and it was accompanied by a 0.7 point jump in participation). Western Australia recorded a fall of 0.3 points to 5.9% unemployment, off another 0.1% fall in participation, while unemployment was flat in Tasmania at 6.6%. All in all no real trend emerged from the state figures.
The January figures came after that quarter of strong jobs creation in Australia, but that was also when the ABS jobs data was hit by doubts about its accuracy. But in a note with the release today, the ABS made it clear those recent problems had no impact on the January figures.
The increase in unemployment in January 2015 in original and seasonally adjusted terms has not been caused by the recent changes to the ABS supplementary survey program.
Overall, the numbers show that, as forecast, the jobs market slowed at the start of 2015 after a strong finish to 2014. That strong quarter coincided with problems around the accuracy of the ABS jobs data. But in a note with the release today, the ABS made it clear those recent problems had no impact on the January figures:
"The increase in unemployment in January 2015 in original and seasonally adjusted terms has not been caused by the recent changes to the ABS supplementary survey program.
"Historically, the ABS had not conducted supplementary surveys in the December and January months, and no supplementary surveys were conducted in December 2014 and January 2015."
It continued:
"The increase in unemployment in original terms is due to:
- a net increase in unemployment in persons who responded to the labour force survey in both December and January (the ‘matched sample’),
- a contribution from the incoming rotation group compared to the group it replaced, and
- a contribution from persons who responded in December but not in January and vice versa."
"Overall response rates for both December and January were in the ABS?s target range of 93% to 95%," the ABS added.
Adding to the need for caution about the jobs data was the number of jobs added to the economy in December being revised upwards from 37,400 to 42,300. A downward revision would add to any feeling the jobs data for January was showing a weakening demand for labour.
While the ABS data bears out the RBA’s obvious concerns about the fragile state of growth in the economy and employment, as we saw in comments at the start of the month, the bigger problems remains the lack of business confidence and for that we can thank the Abbott government and its inept performance in recent months.
