It’s not often the Aussie dollar falls after jobs data showing an increase of 38,500 jobs, but that’s what happened today when the ABS released its latest employment report.
Key to the price action could be that around two-thirds of the jobs created were part-time, but more likely it was the unemployment rate increase to 6.349%. That, as David Scutt noted is the highest level since June 2002. “Had it been just 0.001% higher, the figure would have been reported as 6.4%,” Scutt wrote and it seems many traders have the same focus.
But while the unemployment rate is higher than the RBA would like, the statistics show, once again, that there are now more Australians in work than ever before.
The ABS reported that on a seasonally adjusted basis there were 11,810,706 Australians employed in July. A rise of 38,500.
That’s important because more Australians working means more spending. We live in a largely service-based economy so that money then flows around creating more spending and it seems, more jobs.
Yes, the unemployment rate is important and the sticker shock of the highest rate in more than a decade will be noticed by workers and reported widely. But back in June 2002 there were only around 9.165 million people employed in Australia. An additional 2.65 million are working now.
There was also lower labour force participation in 2002 than we have today.
That means that when the sums are done to work out the unemployment rate, a lower percentage of Australians said they were either working or looking for work.
That’s important because the unemployment rate is simply the difference between the people the ABS says are in the labour force (12.61 million) and those employed (11.81 million) divided by the total labour force. So in July we had approximately 801,000 people looking for work divided by the 12.61 million labour force. That gives a rough 6.35% unemployment rate which, without my rounding, the ABS reported as 6.349%.
Yes, the rate is the same as in 2002, but the higher participation rate today tells us that we’re in much better shape than 13 years ago.
Equally the employment-to-population ratio is higher now in 2002. That tells us a higher percentage of Australians are earning an income via jobs. It’s off the recent highs, but it is rising again.
Many observers won’t believe the economy created 38,500 jobs last month. I’m one of them, and the ABS notes there is a wide margin of error for any single month’s data. But the key here is that the economy has defied for many months, the belief that it was in much weaker shape.
So while Labor will do what oppositions do and focus on doom and gloom, along with some of the media, the facts are that the economy is creating jobs and more Australians than ever before are working, spending and paying taxes.
That’s a good thing and worth celebrating.