RP Data – Unemployment peaks lower than forecast on lower participation

The Australian Bureau of Statistics (ABS) recently published labour force statistics for May 2014.

The data reported that the national unemployment rate was steady at 5.8%, the 3rd month in a row it had been recorded at this level.

The rate of unemployment is up from 5.5% a year ago but still well below the 6.25% many had predicted it would have reached by now.

Chart 1

The full-time unemployment rate at a national level is slightly higher than the overall unemployment rate, recorded at 6.0%.

Chart 2

Although we have seen a fairly stable unemployment rate of late, the employment participation rate is continuing to trend lower.

A key challenge for the Government is to encourage the long-term unemployed persons back into the workforce.

Although the participation rate data suggests that this may not be working, keep in mind also that with an aging population more and more baby boomers are reaching retirement age and exiting the workforce.

The current workforce participation rate is recorded at 64.6% which is at around its lowest level since March 2006.

Chart 3

Turning to actual employment, in May 2014 there was 11,564,555 persons employed nationally, 8,068,338 employed full-time and 3,496,216 employed part-time.

As at May 2014, 30.2% of all employed persons were employed part-time.

As you would expect, females are much more likely to be employed on a part-time basis compared to males. As at May 2014, 16.9% of total males employed were employed part-time compared to 45.9% of females employed.

Although the proportion of males employed part-time is much lower than females it has been trending higher and is close to an historic high.

Chart 4

Over the 12 months to May 2014, the number of employed persons has increased by 98,700 persons with a 49,700 person increase in full-time employment and a 49,000 person increase in part-time employment.

At the same time a year ago, total employment had increased by 102,900 persons with full-time employment increasing by 22,100 persons and part-time employment rising by 80,700 persons.

Chart 5

The national data highlights that the unemployment rate has seemed to have stabilised over recent months and jobs continue to be created however, the data at a state level is somewhat more varied.

Based on the less volatile trend data, Tasmania has the nation’s highest unemployment rate at 7.5% and the Northern Territory the lowest at 3.3%.

As you can see there is a big discrepancy in unemployment on a state by state basis.

Chart 6

Looking at the current tend unemployment rate compared to trend unemployment a year ago we can see some different trends across the states.

New South Wales was the only state where there was no change to unemployment over the year, steady at 5.5%.

The unemployment rate rose in Victoria, Queensland, South Australia and Western Australia with the largest increases in Victoria and South Australia.

In Tasmania, Northern Territory and Australian Capital Territory the unemployment rate is lower over the year with a substantial fall in the Northern Territory.

Chart 7

The employment participation rate also varies significantly across the states.

As you can see from the above chart, employment participation is trending lower across most states and below its recent peak in each state.

The state and territories with the highest participation rate are: Northern Territory (76.2%), Australian Capital Territory (70.9%), Western Australia (68.2%) and Queensland (66.4%). Across the remaining states, participation is lower, recorded at 63.0% in New South Wales, 64.2% in Victoria, 62.0% in South Australia and 60.9% in Tasmania.

Overall the May release showed a level of stability returning to the unemployment rate.

Keep in mind the Federal Budget forecasts indicate the unemployment rate to peak at 6.5% however, it is important to note that previous Government forecasts expected the unemployment rate to be at 6.2% currently.

With an aging population we are likely to see the employment participation rate trend lower which will increase pressure on business to improve productivity.

On a state-by-state basis the employment picture varies and it will important to keep an eye labour market conditions particularly in Victoria and South Australia where the unemployment rate has risen sharply over the past year.

Keep in mind upcoming high-profile manufacturing closures within the car industry are yet to really bite and will impact both Victorian and South Australian jobs.



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Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au

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