Australian unemployment, as measured by the ABS, has risen since late last year.
It currently sits at 5.6%, reflecting the fact that the size of Australia’s labour force has increased faster than employment over the past six months or so, leading to a modest increase in unemployment.
However, with economic growth picking up and lead indicators on employment remaining firm, many expect the recent trend will reverse in the months ahead.
But will it?
Based on the chart above from Macquarie Bank, Australian unemployment may get worse before it gets better, at least based on Roy Morgan’s separate measure on unemployment.
Whatever the reason, when the latter is advanced by eight months, it has a reasonable relationship to changes in the ABS measure.
Yes, it’s hardly perfect, but it’s interesting nonetheless.
While the Roy Morgan series points to the risk that unemployment may lift further in the coming months, should the relationship be maintained, it also suggest unemployment may begin to fall again in the latter parts of the year.
Economists don’t expect there’ll be any improvement when Australia’s May jobs report is released tomorrow with the median forecast looking for unemployment to remain steady at 5.6%.
Many, including the RBA, believe unemployment will need to fall to 5%, or below, before wage pressures will begin to build.