The run of good economic news continues for Wayne Swan with unusually strong labour force data for May from the Australian Bureau of Statistics this morning, reinforcing the surprisingly strong first quarter economic growth figures from yesterday.
And for those who see all economic data through the prism of interest rates, the jobs news was immediately seen in the market as ruling out further rate cuts, or at least limiting them. The Aussie dollar jumped from 98.85 US cents to 99.50 in the minutes after the data release at 11.30am.
On the face of it, the news wasn’t so good — the jobless rate rose to 5.1% from 5.0% (strictly 4.96%, revised up from the originally reported 4.9%). But the ABS reported that the total number of people employed jumped by a startling 38,000 in May to 11.537 million people, seasonally adjusted, thanks to a sharp rise in the number of full time jobs (46,000) offset by a small fall in part-time jobs. The ABS said the increase in employment was driven by increases in both male and female full-time employment. There’s no evidence of impact from the regular reports of job cuts at big firms over recent months.
So why the increase in the headline rate? There was a big rise in participation. May saw the participation rate jump 0.3% to 65.5%. The slow decline in participation since 2010 has been a rare blot on the government’s economic record, especially given its big commitment of taxpayer funding to boosting participation. We’ll see as the months go by whether this is the start of a trend back up.
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In some ways it was a reversal of the (equally surprising) 0.2% drop in the jobless rate in April, which was partly caused by a fall in the participation rate as people stopped looking for work and the loss of around 10,000 full-time jobs and the creation of 26,000 part-time jobs.
The ABS monthly aggregate hours worked series also showed a decrease in May, down 4.7 million hours to 1,627.2 million hours, which will have consequences in months to come for labour productivity figures.
The west continues as the stand-out jobs economy: unemployment remained at 3.8% in WA, off a small rise in the participation rate (remember state participation rates bounce around a lot more due to the smaller sample size). NSW was next, with a 0.1% rise to 5%, but on the back of a 0.6% lift in participation, which augurs well for Barry O’Farrell getting our biggest state moving again. South Australia was down 0.1% to 5.1% off a small lift in participation; then Victoria, on 5.4%, up 0.1% but with a 0.3% rise in participation. The real shocker was Queensland, which saw unemployment jump 0.6% to 5.7% off a small rise in participation. Tasmania finally had some good news, with unemployment down 1.5% to 6.6%.
The strong first-quarter GDP growth was dismissed by many commentators (those who have been gloomy and forecasting worse to come and a rise in jobless numbers) as being “backward looking”. The strong jobs data for May undermines that absurd rationalisation.
The economy is certainly patchy (not two-speed), thanks in part to weak demand and changing consumer spending patterns, but also to the growth in internet transactions and the continuing impact of the strong currency. Retailing is undergoing a significant bout of restructuring thanks to the combination of the high dollar, the internet and changing consumer spending patterns. These can’t be halted by any policy action, and certainly a fall on the value of the dollar will only bring temporary respite at best.
But it shouldn’t be mistaken for a weak economy, and any politician or commentator who tells you different is lying. Given today’s figures, demonstrably so.