Australia’s unemployment rate rose to 5.6 per cent in March, with the economy shedding 36,000 jobs and lifting the jobless rate to its highest level since 2009.
It’s a vindication for many commentators who tittered at the February result, which showed the economy had added around 74,000 jobs. That now appears to have been due to some significant statistical weirdness.
Even though Australia’s unemployment rate continues to be markedly lower than most western countries, there are concerns about overall sluggishness in the economy, particularly with the mining boom hitting its peak and other sectors having to pick up the slack — and there are many signs that they’re not doing that fast enough.
And there could be more to worry about when it comes to the jobs market than the official figures might have us believe.
AMP Capital’s chief economist Shane Oliver said today that the falling workforce participation rate – down from 65.6% in 2011 to 65.1% now – was potentially masking a much weaker jobs market than the headline figure suggests.
Oliver estimates around half of the decline in the participation rate is down to the ageing population and baby boomers retiring – but the rest could be “people giving up looking for a job”.
“Normally the participation rate wouldn’t fall this much,” Oliver told Business Insider.
The soft labour market was acting as a dampener on the economy and was “another indicator that the economy is sub-par”.
Oliver, who is also AMP Capital’s Head of Investment Strategy, believes the Reserve Bank of Australia may need to cut rates further in the coming months. “The signs of the pickup are somewhat tentative,” he said. Over the next six months the sluggishness was likely to continue which would “ultimately justify another cut”.
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