Something unusual has been seen in recent Australian jobs data which, if repeated later this week, could see unemployment fall below 5% for the first time since 2011.
As seen in the chart below, in each of the past seven months Australia’s labour force participation rate — measuring the proportion of working-age Australians with a job or actively seeking work — has moved in the opposite direction to a month earlier.
In October, it increased by 0.1 percentage points to 65.6%. Should the recent pattern be maintained, it suggests that lift could be reversed when Australia’s November jobs report is released on Thursday.
As the National Australia Bank’s (NAB) Australian economics team notes, that also means the risk to Australia’s unemployment rate may also be to the downside in November.
“NAB expects employment grew by 20,000 in November and that the unemployment rate stayed at 5% due to an unchanged participation rate,” it says.
“There’s a risk that the unemployment rate could tick down, given the see-saw pattern of movements in the participation rate over much of this year and our expectation that the participation rate should decline from its high level over the next year.
“Should the participation rate decline by more than 0.03 percentage points, with 20,000 employment growth, the unemployment rate would tick down to 4.9%.”
So if employment grows at a decent clip and participation edges lower, it will push the proportion of the labour force who are unemployed lower as well.
The question is whether that will eventuate?
Regularly, employment growth and the participation rate have moved in the same direction this year, including in October when unemployment held steady at 5% despite employment lifting by 32,800 over the month.
We’ll find out the actual outcome when the November jobs report is released at 11.30am AEDT on Thursday.
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