A lot of frothing at the laptop and on TV and radio yesterday accompanied news that the unemployment rate has risen to a decade high of 6.4%, seasonally adjusted. The number of new jobs fell (a whole 300 was the estimate) against forecasts for 12,000 or more new jobs from the market. The rise in the headline rate to a 12-year high triggered the outpouring of gloomy stories, such as we saw in the morning papers on Friday.
And of course, this chattering has raised the spectre of an interest rate cut next time the Reserve Bank meets — before last night’s jobless figures, economists unanimously agreed the RBA would keep rates on hold in September. But the Reserve Bank has made it clear it understands the weakness of the labour market, so it won’t be forced into a rash decision by one month’s odd reading on the headline rate — and that’s what the July jobs report really was.
Many media reports failed to point out that despite this big rise in the headline jobless rate, the trend unemployment rate rose 0.1 percentage point to 6.1%. The trend rate is designed to smooth out these fluctuations in the month-to-month seasonally adjusted figures.
But all this media posturing and opining ignored a couple of salient points — the most important being that July’s fall was the fourth monthly fall in new jobs in the past year — and the smallest. There were around 5300 jobs lost in July 2013 (and a further 8600 in August of that year). Other down months were December 2013, with around 24,400 lost and May this year, with 4800 jobs lost.
In fact, the 300 jobs estimated to have been lost was the smallest loss since the start of 2011 — out of a total of 14 months of job losses (in the 42 months, or a third). It is in fact possible the 300 lost jobs will be revised away in coming months (or increased). These are estimates, not hard and fast figures.
Certainly it would not have come as a surprise to the RBA, which expects the jobless market to remain weak for some time yet before signs of a sustained recovery appear — that’s despite some signs of an improvement in the health of the market this year. Some clearer-thinking business economists pointed to the RBA’s current understanding of the weakness of the jobs market.
If the loss was in accord with the RBA’s views, how could it cause a change in interest rate thinking? We will find out later today the latest thinking on growth, inflation and the strength of the economy when the RBA releases its third Statement on Monetary Policy for the year.
There certainly has been a slowdown in jobs creation from the 90,000-odd created in the first three months of the year to the 20,000 or so created in the June quarter. But solid points from the jobless report for July yesterday were 14,500 full-time positions added. An estimated 14,800 part-time jobs disappeared, but many of those could have filled the new full-time gigs created. The participation rate edged higher to 64.8% from 64.7% in June, which means there was a small rise in the number of people looking for work.
The number of hours worked fell by around 14.8 million in July, a surprise given the rise in full-time employment (offsetting the fall in part-time work). But that balances the 15.1 million rise in June, when nearly 15,000 new jobs were created.