Jobless rate steady for third month
Australia’s jobless rate is steady, but only because people are dropping out of the race for a job.
Unemployment remained unchanged at 5.8 per cent in May, beating economists’ expectations of a rise to 5.9 per cent.
The static result came despite the economy having shed almost 5,000 jobs last month, the first fall in five months.
AMP Capital chief economist Shane Oliver says while the jobless rate has held for three months, it “significantly understates” the current weakness in the job market.
That’s because the participation rate – which includes those in work, looking for work and ready to start work – continues to fall.
It dropped to 64.6 per cent in May.
“If the participation rate had remained at its 2011 average level the unemployment rate would now be seven per cent,” Dr Oliver said.
Australia’s participation rate has been trending lower since the global financial crisis.
“We’ve got the ageing population, people are retiring, leaving the labour force,” JP Morgan economist Tom Kennedy said.
“There could also be disgruntled workers leaving the labour force, and we are also seeing young people staying in education for longer, going to university and TAFE instead of actively seeking work.
“Today’s data fits with the theme that the labour market is still a little bit soft, still losing jobs, and unemployment is likely to move higher as we progress through 2014.”
Dr Oliver said a dip in jobs growth was to be expected following a strong start to the year, with more than 100,000 positions created in the first four months of 2014.
While some economists believe the jobless rate has peaked, Dr Oliver believes unemployment could return to six per cent before the labour market picks up later in the year.
“While the hit to confidence from the federal budget has increased the level of uncertainty, forward looking indicators for the labour market, including the ANZ job ads survey and employment intentions in the monthly NAB business survey point to stronger jobs growth ahead,” he said.
Thursday’s figures from the Australian Bureau of Statistics showed full-time employment rose 22,200 in May while part-time employment fell 27,000.
That shows the jobs market is playing out nicely and running pretty much to plan, CommSec chief economist Craig James said.
“We seem to have gone through the first stage of recovery with more part time jobs coming on and now we are starting to see more full time workers coming through and part time workers being converted to full time staff,” Mr James said.
“The solid lift in full-time job creation in 2014 should provide a boost to consumer sentiment… more full-time jobs lead to higher consumer spending.
The figures should allow the Reserve Bank to keep interest rates on hold, unless the federal budget and warm autumn weather robs momentum from the economy, Mr James said.