After two months of impressive jobs growth, Australia’s unemployment rate stalled in December.
The months leading up to December were as remarkable as they were surprising. Despite signs of a slowing economy, unemployment fell from 6.1% to a low of 5.8% in November.
While December didn’t see an improvement on that, new ABS figures show unemployment remained stable at 5.8%.
It’s estimated some 1,000 jobs were lost during the month. Despite 17,600 new full time positions, a loss of 18,500 part time jobs offset those gains.
That full time outperformed part time work this much was seen as encouraging. But the positive figures came as a surprise to many who were predicting much bigger losses.
The ABS figures are in contrast to analyst estimates in the lead up to the figures’ release. According to a Bloomberg survey, the economy was estimated to have shed 10,000 jobs last month. That would’ve been enough to lift the unemployment rate back up to 5.9%.
It turned out the official ABS figures bettered expectations by some margin. So how was it that analysts missed the mark so badly?
At times, we have to call into question the reliability of the ABS jobs data. Many eyebrows were raised in November when the ABS announced the labour market added 71,000 new jobs that month. Some even went as far as questioning the ABS’ methods in how it collects its data.
Taken in the context of a sluggish economy, you can understand where the scepticism comes from. Those figures were, and still are, hard to believe. October and November 2015 collectively added 127,000 new jobs. We haven’t seen such back to back monthly figures in over 30 years.
Either way, whether we feel the ABS figures are reliable or not almost doesn’t matter. It’s all we have to go on. Without a better alternative, it’ll have to do. So let’s look at what else it had to tell us.
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Paring through the unemployment data
The participation rate is one of the key metrics to look at every month when the figures come out. It measures both the number of people working, and the number seeking work. Importantly, people that stop looking for work don’t count towards the unemployment rate.
So how did participation fare in November? The measure actually fell from 65.3% to 65.1%. Again, that shows there were fewer people looking for jobs that month.
This might be where analysts are vindicated a little. If those people hadn’t stopped looking for work, the number of unemployed would’ve gone up. Maybe even enough to lift the unemployment rate up to 5.9%.
Is it logical to measure unemployment in this way? Until we know whether people have given up because they want to, or because they have to, it won’t tell us much.
Elsewhere, the total number of hours worked rose by 0.3 million to 1.64 billion. Not a massive change in hours. But it does support figures showing the extent that full time work beat out part time work.
Ultimately, December was a low key finish for what had otherwise proved a good year for the jobs market. On trend terms, employment rose 312,000 in the 12 months to December. Even more impressive was the fact that full time work rose by 186,600 during the year.
Jobs market looks upbeat…for now
Perhaps sceptics like me take a bit too much pleasure in seeing unemployment rise. Not because we wish more people were out of work. But because we can’t figure out how the labour market manages to holds up as well as it has.
Yet our desire to be right may be clouding our judgement. We refuse to see what’s in front of our eyes.
Take for example the unmatched appetite Aussies have for shopping. Spending levels held up well in 2015. Maybe that’s because households felt richer on the back of rising home prices. Or maybe they’re financing their habits with debt. Either way, we’re still consuming.
At the same time, we shouldn’t overlook the effect that weaker oil prices have had. Typically, cheaper oil leads to increased spending, as people have more money to spend on other goods.
And there are other factors, like demographics, playing their part too. As CommSec’s Craig James explains:
‘There are the demographics — an ageing population continues to create jobs in the healthcare sector, and the strength of the tourism sector is being under-estimated, almost half a million additional tourists visited our shores in 2015 compared with a year ago.’
The point about tourism is important. Tourism is one of the key pillars policymakers identified as a growth sector to offset the decline in mining. Part of that strategy has been to make sure the Aussie dollar weakens as much as it can.
There’s been mixed success on that front. Rate cuts, and commodity price routs, have helped push the dollar below US$0.70. But it can’t seem to find a home below that threshold, as it’s yo-yoed up and down the past six months.
Strength of demand in the services sector
Another indicator of the labour market’s strength is that vacancies have hit a three year high.
There were 167,600 vacancies in November. That’s the highest level since August 2012. Vacancies are up 3.5% from three months earlier, and 11% for the year to date. Most job openings are in the retail sector, which shot up 23.6%.
All in all, service sector job creation kept the jobs market steady in December. Job ads are up, as are vacancies, and the market looks healthy.
The only question mark is the one hanging over the falling participation rate. If job ads and vacancies are up, it means most people dropping out of the workforce are simply fed up with working.
Better that than the alternative.
Junior Analyst, The Daily Reckoning
PS: Australia’s unemployment rate is holding steady, but for how long? Weak growth prospects are forcing businesses to cut back on spending. You can expect this to ramp up in 2016, as weaker economic activity catches up with the labour market.
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