Australian employment has been growing strongly recently. The unemployment rate has also been rising.
In January 2015 more Australians were working than in any other month in Australia’s history except December 2014. Yet the unemployment rate spiked to 6.4% – the highest level in more than a decade.
The conundrum of growing employment and rising unemployment has many wondering about the true state of Australia’s employment market.
David deGaris, Senior Economist at NAB had the answer in a note to clients today. deGaris wrote:
In trend terms, employment in January rose by 15,200, an annualised growth rate of 1.6%, not low but not sufficient to match the 1.8% growth in the working age population and avert a rise in unemployment. In January, the trend unemployment rate was 6.3%; a year earlier the trend rate was 5.9%. It’s been rising now since 2011-12 when the rate was 5%.
Easy employment is rising but the population is rising faster.
That means the NAB thinks the unemployment rate will rise to 6.6% at some point this year and the RBA will cut the cash rate to 2% by May.
Then hopefully the economy will be strong enough that jobs outpace population growth.