Unemployment dips in August despite fewer jobs

A new three-year low in Australia’s unemployment rate is due entirely to falling participation.

The economy lost 3,900 jobs for the month, in seasonally adjusted terms.

Australia’s unemployment rate has dipped to 5.6 per cent in August despite a significant miss in the number of jobs added.

Official numbers from the Australian Bureau of Statistics reveal the jobless rate slid 0.1 percentage points to 5.6 per cent — a three-year low — due entirely to a drop in the participation rate from 64.9 per cent to 64.7 per cent.

The economy lost 3,900 jobs for the month, in seasonally adjusted terms, well short of market forecasts for a rise of 15,000.

The finer details of the report are not quite as disappointing as the headline number, with a 15,400 decline in part-time jobs driving the weak reading.

In contrast, fulltime jobs rose by 11,500, reversing a recent trend that has seen part-time employment comfortably outpace expansion in fulltime positions.

RBC Capital Markets fixed income and currency strategist Michael Turner said the “mixed” report signalled inflationary pressure was unlikely to rise in the near-term.

“Broader measures of labour market slack have not declined by as much as the unemployment rate,” he said.

“In short, the improvement in the labour market remains gradual at best. While not providing much pressing need for easier policy for now, it does provide a backdrop of weak inflationary pressures.”

Mr Turner added underutilisation of the workforce would continue to weigh on wage growth expectations.

“The official underutilisation rate adds underemployed workers to unemployed people, with this measure up 0.1 percentage point to be 14.3 per cent in August and thus unchanged over the past year,” he said.

“This continues to point to above-average spare capacity and thus continued subdued wage pressure.”

RBC foresees the unemployment rate steadying around current levels for the foreseeable future, with a modest improvement to 5.5 per cent forecast by the end of next year.

On a state-by-state basis, Victoria shone as it enjoyed the greatest improvement in its jobless rate and strongest rise in jobs, with its unemployment rate dipping 0.3 percentage points to 5.5 per cent and 20,700 jobs added.

New South Wales also saw an improvement in its jobless rate — from 5.2 per cent to 5 per cent — although that was pinned on a rise in the number of discouraged unemployed persons given employment fell by 9,200.

The second largest decrease in jobs came in Queensland, which shed 7,600 and saw its unemployment rate rise 0.1 percentage points to 6.2 per cent.

The jobless rates rose most in South Australia and Tasmania, although these two states also saw the greatest lift in participation.

The Australian dollar slumped on the update, sliding US0.3c to US74.51c at 11.55am (AEST).