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Full-time jobs lift but unemployment at a 12-year high

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Friday, August 08, 2014

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by Savanth Sebastian

  • Jobs losses: Employment fell 300 in July after rising by revised 14,900 in June (previously reported as a 15,900 lift in jobs). Full-time jobs rose by 14,400 in July after falling by 3,800 in June. Part-time jobs fell by 14,800 in July after rising by 18,800 in June.
  • A total of 109,900 new full-time jobs have been created in the first seven months of 2014 – the best start to a calendar year since 2008.
  • Jobless rate lifts, more looking for work: The unemployment rate lifted from 6.1 per cent to 6.4 per cent in July – a 12 year high. The participation rate rose from 64.7 per cent to 64.8 per cent.
  • Hours worked fell by 0.9 per cent in July after rising by 1.2 per cent in June. Hours worked are up 0.7 per cent over the year.
  • Mixed tourist arrivals and departures: Tourist arrivals fell by 3.0 per cent in June while departures rose by 2.1 per cent.
  • The number of Chinese tourists hit a record high of 769,200 in June, up 11.4 per cent on a year ago.

A raft of companies is affected by the result but especially those dependent on consumer spending. Amongst stocks affected are Fairfax, West Australian Newspapers, Seek Limited, McMillan Shakespeare and Skilled Group. The tourism data is important for airlines, travel groups, transport companies and retailers.

What does it all mean?

Contrary to the headline lift in the unemployment rate the job market is in decent shape. Yes, unemployment did lift to a 12-year high of 6.4 per cent. But the real driver of the lift in unemployment was more people looking for work - not entirely a negative outcome. A healthier economy, improved job prospects, and more importantly a noted lift in job advertisement have resulted in more people searching for work, with an ongoing lift in the participation rate over the last couple of months.

The labour market at present can be described as being in a state of flux. Hours’ work lifted over the past year, while an ongoing shift from part time to fulltime jobs is now taking place.

It is important to keep in mind that jobs growth has been solid over the past few months, particularly when it comes to full-time jobs. In fact almost 110,000 full-time jobs have been created in the first seven months of 2014 – marking the best start to a calendar year in six years.

There is no question that the economy went through a lull period following the Federal budget but it has since lifted. And it is pretty clear that the transition in activity from mining to housing construction has been a case of so far so good, and more importantly housing construction will support a further lift in employment.

The Reserve Bank is unlikely to be overly worried by the lift in unemployment. RBA business liaisons have commented on the noticeable lift in business hiring intentions and it suggests labour market conditions are heading in the right direction. Employers are working existing staff harder but as profitability improves, management will feel more comfortable increasing head count.

In just under four years, the annual number of Chinese tourists to Australia has doubled. And although the growth rate has slowed a touch in recent months, China will still surpass New Zealand as our primary source of tourists in around four years’ time. The other important development is that overall tourist arrivals are growing just shy of the fastest pace in 14 years – no doubt boosted by the improvement in the global economy, and mildly weaker Aussie dollar.

While rate hikes are off the near term agenda, it is unlikely that the Reserve Bank will shift away from its “interest rate stability” rhetoric any time soon. A solid few months of robust employment would be required. The data suggests that the Reserve Bank will continue to keep a neutral view on rates with a slightly dovish skew.

What do the figures show?

Labour force

Employment fell 300 in July after rising by revised 14,900 in June (previously reported as a 15,900 lift in jobs). Full-time jobs rose by 14,400 in July after falling by 3,800 in June. Part-time jobs fell by 14,800 in July after rising by 18,800 in June.

The unemployment rate lifted from 6.1 per cent to 6.4 per cent in July – a 12 year high. The participation rate rose from 64.7 per cent to 64.8 per cent.

The number of hours worked by 0.9 per cent in July after rising by 1.2 per cent in June. Hours worked are up 0.7 per cent over the year.

The annual employment growth rate was steady at 0.9 per cent in July. The working age population grew by 26,000 people in July and by 342,100 over the year or 1.83 per cent.

Unemployment across states and territories: NSW 5.9 per cent (June 5.7 per cent); Victoria 7.0 per cent (6.6 per cent); Queensland 6.8 per cent (6.3 per cent); South Australia 7.2 per cent (7.3 per cent); Western Australia 5.2 per cent (5.0 per cent); Tasmania 7.6 per cent (7.3 per cent). Trend unemployment Northern Territory 4.8 per cent (4.5 per cent); ACT 3.9 per cent (3.8 per cent).

Jobs across states and territories: NSW -4,300; Victoria +14,600; Queensland -12,600; South Australia -4,200; Western Australia +1,300; Tasmania -600. Trend employment Northern Territory -800; ACT +200.

Arrivals & departures

The number of people coming to Australia for holidays or business fell by 3.0 per cent in June after rising by 1.8 per cent in May. Arrivals are up 0.4 per cent on a year ago. In trend terms arrivals are up 9.5 per cent on a year ago.

In June, 70,000 tourists from China came to Australia, up 8,000 on a year ago. The annual number of Chinese tourists hit a record high of 769,200 in June, up 11.4 per cent on a year ago.

The number of Aussies travelling overseas for holidays or business rose by 2.1 per cent in June after falling by 5.0 per cent in May. Departures are up 5.1 per cent on a year ago.

In seasonally adjusted terms the tourism deficit (departures less arrivals) widened from 191,500 to 207,400 in June.

The rolling annual number of net permanent and long-term arrivals to Australia stood at 383,280 in the year to June, down from 385,280 in May and well short of the record high of 416,810 in the year to July 2009.

The actual number of permanent settlers entering Australia stood at 10,380 in June. Over the past year 140,630 people came to Australia as permanent settlers. The annual number of permanent settlers from the UK is at an 11½-year low but settlers from India and China are just below record highs.

Why is the data important?

The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.

If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.

The Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector. The figures are also useful in understanding spending trends and tracking migrant numbers – an indicator with widespread implications for employment, housing and spending.

What are the implications?

In the past, employment data has been volatile around turning points, but clearly the last seven months of jobs growth suggest an improvement in labour market conditions, despite the lift in the unemployment rate. Hopefully the focus in the latest data will centre on ongoing full-time job creation and more people looking for work rather than the lift in the unemployment rate.

Clearly the Reserve Bank has no need to be moving rates in any direction at present. The earliest timing of the first rate hike is February next year, but it requires a further improvement in activity levels and a stronger lift in employment.

 

Published: Friday, August 08, 2014


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