Australia’s unemployment rate has surged to 6.4%, the Aussie dollar dropped to 0.9290 and the twitterverse has had a raft of hand wringing over such a big jump the reality is not as bad as the headline number looks.
This is an important message to focus on because 6.4%, the highest rate in more than a decade, is going to scare Australian consumers. It will worry Australian businesses focussed on forward planning – especially those concerned about where buyers will come from.
So while the actual level of unemployment is worrying, the reality in the economy at the moment is that the Australian Bureau of Statistics estimates there are currently 11,576,600 people employed on a seasonally adjusted basis. That’s just 300 people less than the all time record of 11,576,900 which was posted in June.
Certainly the data today was disappointing with employment falling by the 300 mentioned above against market expectations of around 12-13,000 last month. Full time jobs rose 14,400 while part time jobs fell 14,800.
Commsec Chief Economist Craig James said that “a total of 109,900 new full-time jobs have been created in the first seven months of 2014 – the best start to a calendar year since 2008”.
But the unemployment rate went up because the ABS added 43,400 people to the labour force. Large jumps in the labour force happen all the time but in this instance it is potentially because of a methodology change to the questions asked as part of the employment survey.
The two question ask whether the respondent has:
‘Had an interview with an employer for work’ and
‘Taken steps to purchase or start your own business’
However, the ABS says changing the questions didn’t have a big impact on the data but it does look odd as Justin Fabo Senior Economist from the ANZ noted:
Overall, the report was weaker than expected. But given the sample rotation effect on both employment and unemployment and the potential for some impact from the methodological change on measured unemployment it is very difficult to get a clear read. Moreover, most other labour market indicators are improving, at least slowly, so the jump in the unemployment rate does look odd in that regard. We’ll need the August report to confirm that view.
The good news in the data is that with the Australian rate moving above the US rate, the Aussie dollar is getting hit and hit hard.
It is currently siting at 0.9292 down more than 60 pips from the high of 0.9355.
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