Jobless rate falls as job seekers give up
6
September, 2012
A day after the Australian economy celebrated its 21st consecutive year of growth, there’s more evidence of resilient demand with the nation's jobless rate posting a surprise drop in August.
Recent
job losses at high-profile companies including Qantas, Darrell Lea
and Caltex are yet to bolster the unemployment rate, which actually
eased last month to 5.1 per cent from 5.2 per cent in July.
A
fall in the unemployment rate for August masks weakness in the
national labour market.
The
drop countered analysts' expectations that the rate would nudge
higher to 5.3 per cent, and helps to validate the Reserve Bank's
decision earlier this week to leave official interest rates on hold.
The
rosy jobs result, though, may be a less useful guide than usual to
the underlying strength of the economy. For one thing, the jobless
rate fell even as the economy shed a net 8800 jobs for the month, and
total hours worked actually
.
.
An
accounting trick, of sorts, helps to explain how jobs and the jobless
rate can both decline. Fewer people were actually looking for work
last month, with the so-called participation rate - the share of the
population working or available to work - dropping 0.2 per centage
points to 65 per cent, a level not seen since the start of 2007.
"There
is little labour demand ... people aren't finding jobs, they're
giving up looking for them now," said Brian Redican, a senior
economist at Macquarie. "This won't push the Reserve Bank to cut
rates in October, but nor will it stand in the way of a rate cut for
other reasons."
Without
the masking of the lower participation rate, the jobless rate would
have risen to 5.4 per cent, according to Commonwealth Bank. March
2010 was the last time the rate reached such a level.
‘Soft’
The
economy, in fact, generated just 600 additional full-time jobs last
month, according to the Australian Bureau of Statistics. Since
employers culled 9300 part-time jobs, delivering that net loss of
8800 jobs after rounding. Economists had tipped the economy would add
5000 jobs for the month.
"It’s
certainly softer than what the market was going for," said AMP’
senior economist Shane Oliver.
"The
unemployment number is totally misleading. It only fell because the
participation rate fell, and that's been the story for much of the
last year,’’ he said.
Total
hours worked fell by 5.7 million hours to 1.61 billion hours in
August, the ABS said. The labour force's so-called under-utilisation
rate, which takes into account those looking for more work as well as
the unemployed, fell 0.2 percentage points in August to 12.4 per
cent.
The
Australian dollar initially dropped on the jobs news before
rebounding strongly, back above the $US1.02 mark as investors found
the numbers to be less negative than expected.
As
a result of the renewed confidence, the chance of a 25 basis point
cut in official interest rates next month eased to about 55 per cent,
down from 70 per cent yesterday, according to Credit Suisse data.
State
by state
If
the participation rate's drop masked the overall downward trend then
New South Wales played an equivalent role among the states.
The
most populous state saw its unemployment rate fell 0.4 percentage
points to 4.8 per cent, while the rate rose in all other states.
But
one economist warns against trusting the NSW numbers, saying the drop
may be reversed in September.
"We
are not reading too much into the decline in New South Wales
unemployment rate," said Moody's Economy.com's Katrina Ell. "We
expect it is a monthly anomaly and will probably drift back up to
just above 5 per cent in September."
Elsewhere,
the seasonally adjusted jobless rate in Victoria rose to 5.6 per cent
in August from 5.4 per cent a month earlier, the ABS reported.
The
jobless rate also increased in the mining states, adding to recent
evidence that the resources boom has passed its peak.
Western
Australia’s unemployment rate increased to 3.9 per cent in August
from 3.7 per cent in July.
Queensland’s
rate increased to 5.9 per cent from 5.8 per cent over the same
period. South Australia’s jobless jumped to 5.7 per cent in August,
from 5.4 per cent in July.
Tasmania’s
unemployment rate jumped, hitting 6.8 per cent, from 6.5 per cent the
month before.
Participation
worries
The
fall in the participation rate lies at the heart of concerns about
today’s number. JP Morgan economist Ben Jarman said the data showed
all types of workers were giving up the hunt.
‘‘Ultimately
this is an unsustainable way of keeping the unemployment rate low,"
he said. ‘‘You either have to get the participation rate back, or
there is less income circulating around the economy."
Mr
Jarman said that if there was less income in the economy, household
consumption was likely to weaken and that could see the RBA consider
further rate cuts to spur growth.
Job
losses
Despite
the unemployment rate falling to its lowest since May, companies
across the country continue to cut jobs amid predictions that
economic growth will moderate in the second half of the year.
Big
question marks hang over the pace of expansion in the resources
sector. Fortescue Metals announced job cuts this week and BHP
Billiton has placed major projects on hold as commodity prices
retreat.
Retail
jobs also remain under pressure after economic growth data yesterday
confirmed consumers were watching their spending closely. This week
alone, women’s fashion chain Ojay’s and Australian Convenience
Foods were placed into administration, threatening the loss of
hundreds of jobs.
Clouds
gathering?
Some
economists expect the unemployment rise to 5.5 per cent by the end of
the year as the overall economy's expansion slows.
Yesterday,
the ABS released figures showing the economy grew strongly in the
June quarter, but at less than half the pace of the March quarter.
Gross domestic product (GDP) rose by 0.6 per cent in the three months
to the end of June, taking the annual rate to 3.7 per cent. While
that is robust by global standards, it marks a slowdown from March,
when the annual rate of growth was 4.4 per cent.
The
weaker outlook is expected to have a flow-on effect for jobs. Leading
indicators of jobs growth have also fallen. The ANZ Job ads index
fell 2.3 per cent in August, its fifth consecutive monthly fall.
Still,
Australia's jobless rate would stoke the envy of many other rich
nations. Less than 60 days before the US presidential election,
America's jobless rate remains at 8.3 per cent, while the eurozone's
rate hovers at 11.3 per cent for July. Even resource rich Canada is
struggling with a jobless rate of 7.3 per cent, in part because of
its dependence on its giant neighbour, the US.
In New Zealand this was reported as -
Kiwi
gains as Australian jobless
rate falls
The
New Zealand dollar gained in "thin" trading after
Australia's unemployment rate unexpectedly fell and as investors
prepare for the European Central Bank meeting.
No comments:
Post a Comment
Note: only a member of this blog may post a comment.