Despite having a diversified and skilled services-based workforce, the country has been facing turmoil in its labour market. The persistence of higher unemployment rate in Australia has remained a cause of concern for the Reserve Bank of Australia (RBA) in the last few months. The central bank has lowered the interest rates to 1 per cent this year to create stabilisation in the Australian economy.
As per Austrade, Australia has a culturally diverse labour force, wherein more than 30 per cent of the strong employed persons are born overseas. The nation’s competitive edge in international business has been boosted by many foreign-born employees from Asia or Europe that have enriched the country’s reputation for culturally diverse workplaces.
The independent statistical agency of the Australian Government, the Australian Bureau of Statistics (ABS) has recently released employment figures for August 2019. One can deduce the following three cues from the unemployment rate figures:
Let us discuss each one of these cues in some detail below:
Unemployment Rate Hits One-Year High in August
As per ABS, the unemployment rate has risen by less than 0.1 per cent in August 2019 to 5.3 per cent in seasonally adjusted terms, along with a rise in underemployment rate to 8.6 per cent.
The nation’s jobless rate touched its highest level of the year, prompting the country’s currency to fall to a two-weeks low value of $0.6787 on 19th September 2019.
Although the employment rose by 34,700 persons to around 12,926,900 persons, the full-time employment declined by 15,500 persons to 8,818,000 persons in August. The increase in part-time employment by 50,200 persons to 4,108,900 persons, drove the rise in employment.
If observed since August 2018, the part-time employment demonstrated a rise of 124,000 persons, while the full-time employment showed an increase of 186,700 persons.
From July 2019 to August 2019, Victoria witnessed the largest increases in employment of 20,300 persons, followed by New South Wales where employment rose by 16,700 persons. Queensland experienced the largest month-on-month decline of 7,200 persons in August.
The monthly hours worked in all jobs improved by 0.2 per cent or 3.9 million hours to 1.78 billion hours in August. The employment to population ratio also rose by 0.1 points relative to July 2019 to 62.7 per cent. As per the ABS, the monthly underemployment rate and the monthly underutilisation rate increased by 0.1 points each to 8.6 per cent and 13.8 per cent, respectively.
Let us take a look at the state-wise unemployment data (seasonally adjusted terms) for July and August 2019 in the below table:
It can be seen that the unemployment rate rose by 0.4 points in Tasmania (6.4 per cent) and South Australia (7.3 per cent), and 0.1 points in Victoria (4.9 per cent). New South Wales and Western Australia recorded a decline of 0.2 points and 0.1 points in the unemployment rate to 4.3 per cent and 5.8 per cent, respectively.
Participation Rate Increases in August
ABS data also revealed that the participation rate rose by 0.1 points to 66.2 per cent in August 2019 in trend terms as well as seasonally adjusted terms.
In trend terms, the female participation rate improved to 0.1 points to 61.2 per cent, while the male participation rate remained unchanged at 71.3 per cent. Australian Capital Territory recorded a maximum increase of 0.2 points in monthly trend participation rate to 70.6 per cent in August in trend terms.
In seasonally adjusted terms, Victoria and South Australia saw a maximum increase of 0.3 points to 66.4 per cent and 63.9 per cent, respectively in August. Queensland was the only state to witness a decline by 0.3 points to 65.8 per cent.
The below table shows the participation rate observed by different states of Australia in August in trend terms and seasonally adjusted terms:
As per the market analysts, the rise in August’s unemployment rate was due to the strong population growth and high participation rate.
The ABS latest estimates highlighted an increase in the population of Australia by 1.6 per cent to 25.3 million people during the year ended 31 March 2019. A few analysts are of the view that there is an abundance of underutilised workers in Australia that has kept the country’s wage pressures muted.
Probability of Further Rate Cut Increases
Although the Australian economy experienced employment growth in August, the increase in the unemployment rate has raised the probability of another rate cut by the RBA in the near-term.
Recently, the US Federal Reserve has also reduced the interest rates further for the second time this year to sustain economic expansion. Fed has lowered the benchmark overnight lending rate by 25 basis points to a range of 1.75 per cent to 2.00 per cent.
As per Fed Chair Jerome Powell, the economic outlook of the US is favourable, and the current rate cut is designed to insure the economy against ongoing risks including resurgent trade tensions and weak global growth.
Economists are now expecting another rate cut in Australia by October amid weak employment figures of August and the Fed’s rate cut move.
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