Caution urged over unemployment rate dip

Australia’s unemployment rate eased to 5.2% in July, according to new figures, although a Westpac economic note warns it would be “inappropriate” to interpret the fall as the start of a tumble in the jobless level.

According to the Australian Bureau of Statistics, Australia’s seasonally adjusted unemployment rate was 5.2% in July, with the number of people employed increasing by 14,000 to 11,512,600.

The increase in employment was driven by increased full-time employment, up 9,200 people to 8,073,700, and part-time employment, up 4,800 people to 3,439,000.

Meanwhile, the number of people unemployed decreased by 2,500 people to 635,100 in July.

The ABS monthly aggregate hours worked series showed an increase in July, up 13.4 million hours to 1,625.1 million hours from a revised June 2012 estimate.

In July, the ABS reported a labour force participation rate of 65.2%.

According to Westpac, the July outcome continues the weak trend in full-time employment seen over the past six months, with a net 9,000 jobs added.

“Due to revisions to the June report, where the unemployment rate was revised up from 5.2% to 5.25%, there has been an apparent fall in the unemployment rate,” Westpac said in a report.

“However, given that our starting point was the 5.2% unemployment rate as originally expected for June, there has been a modest increase from 5.2% to 5.23%.”

“If ever there was a ‘neutral’ jobs report, then this surely is one.”

“It certainly would be inappropriate to read the headline fall in the unemployment rate from 5.3% to 5.2% as some indication of a turning point, given that 5.3% has been the high in recent times.”

As noted above, Westpac said movements in the participation rate and the unemployment rate were very marginal.

“The unemployment rate edged 0.02% lower to 5.23% in July while the participation rate edged 0.01% lower to 65.25%. The employment to population rate was unchanged at 61.84%,” it said.

Westpac said NSW, Queensland and South Australia saw small increases in employment of between 2,000 and 6,000, while Victoria and WA both lost around 4,000 jobs in the month.

“Overall, the July labour force survey is consistent with our long-held expectation that employment will maintain a decidedly modest pace through the second half of 2012,” it said.

“Continued population growth, a broadly stable participation rate, and modest job increases will see the unemployment rate rise by year’s end.”

“The soft tone of recent business survey data and the trend rise in our Westpac–Melbourne Institute unemployment expectations survey is consistent with this view.”