While we got more evidence from the employment report for July yesterday of a solid growth in new jobs in July (and a surprise rise in the unemployment rate to 6.3%), it could be a case of too much statistical noise in the data confusing what is happening in the labour market.
On the face of it the economy looks a bit stronger than it seems.
On top of the continuing solid building approvals, especially for new private housing, low inflation, a surprisingly strong rise in retail sales in July and near record car sales (as well as the home buying boom), there seems to have been an uptick in jobs seekers in the past month, hence the surprise rise in unemployment at the same time there was a near 40,000 rise in the number of new jobs created last month.
It was more confirmation that the economy is growing slower than we want, but is making the transition from the resources boom to a more traditional growth pattern.
If anything the jobs market continues to confound the experts and doomsayers among the analysts as the jobs market has shown surprising strength for the past 10 months or more.
Thanks to stronger demand from consumers, the fall in the value of the Aussie dollar, weak inflation and cost pressures, and especially weak to falling real wages there’s been an unexpected growth in new jobs.
According to the latest Bureau of Statistics figures, 236,000 new jobs were created from July last year to last month, or nearly 20,000 a month.
This has happened at a time when forecasters, from the Reserve Bank to Treasury, were reluctantly forecasting the unemployment rate to rise and peak around 6.5%, or perhaps as high as 6.75%, before starting to fall in 2016. In July of last year the jobless rate was 6.4%, against the latest reading of 6.3%.
Headline unemployment up to 6.3%
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The headlines will focus on the jump in the Bureau of Statistics seasonally adjusted jobless rate to 6.3% up from the revised June figure of 6.1% (originally reported as 6%, and May’s 6% also up from 5.9%), and the 40,000 jump in the number of people unemployed to a new decade plus a high of 800,700.
But the instant analysers will tend to skate over the 38,500 new jobs created last month, and the sharp rise in the participating rate to 65.1% from 64.8% in June.
The 38,500 new jobs (to 11.810 million in July, seasonally adjusted) “was driven by increases in both full-time and part-time employment, with the largest increase seen in part-time employment for males (up 20,400),” according to the ABS.
The ABS said the seasonally adjusted monthly hours worked in all jobs series fell last month by 3.4 million hours (0.2%) to 1,633.2 million hours.
The seasonally adjusted number of people unemployed increased by 40,100 to 800,700 in July 2015. The ABS said that rise was “driven by females who looked for both full-time work (up 18,200) and part-time work (up 14,600)".
But the report might not be so ‘virtuous’ – in fact it could be a result of more statistical noise.
As is now increasingly common with this series from the ABS, there seems to be some extraneous factors influencing the data. The 6.3% could be too high, as well as the 40,000 new people joining the ranks of the unemployed.
And it is very possible that both the 38,500 new jobs and the rise in the number of people unemployed could be revised down next month when the Bureau reworks its estimates to take account of lower than expected population growth.
The improvement in jobs was concentrated in Victoria and NSW.
In Victoria the unemployment rate climbed from 6% to 6.4%, while the number of Victorians in jobs rose 6900. In NSW the unemployment rate climbed from 5.8% to 6%, while the number of jobs jumped 29,600.
It’s the first time the jobless rate around 6.3% since January it has been around 6% to 6.1% in recent months. The ABS warns that figure should be treated with caution. Sampling error in the survey means it can only be confident the real rate is somewhere between 6.2% and 7%.
Later this morning we will get housing finance data from the ABS which will be another important indicator for economic activity.
