The employment market and current unemployment rate in Australia are a conundrum.
For all the hand-wringing and implied doom, the reality of the ABS employment report is there were more Australians working in February than any other time in history.
That’s 11,652,389 Australians working.
At the same time the unemployment rate is rising because while employment has been increasing at an average of 10,372 per month since September 2013, the number entering the workforce is growing at a faster pace. That’s meant the employment-to-population ratio falling to 60.6 – the equal lowest level since 2004.
But the outlook is brightening according to Adam Boyton, Deutsche Bank Australia’s Chief Economist, who says jobs growth is going to accelerate. So the unemployment rate will stop rising.
Our tracker of labour market conditions suggests the current solid trend in employment growth (average increase over the past three months being 13.5k, with the ABS’s trend estimate at 14.0k) could potentially nudge a little higher.
Indeed, our ‘tracker’ – shown in Figure 2 – suggests a trend in employment growth of around 18,000 a month, which should be enough to stabilize the unemployment rate.
Boyton also says that even though when he plots his monthly employment tracker against changes in the cash rate it would suggest no more cuts, he’s still “looking for another rate cut from the RBA.”
That will just add a little more stimulus to the economy, but is likely to end RBA rate cuts.
If Boyton is right on the outlook for employment that’s great economic news. It would mean that as well as more Australians working than ever before, the “sticker shock” of rising unemployment won’t impact on consumers in the negative way it is presently.