Mark Mulligan and Misa Han
Australia’s unemployment rate dropped to 6.1 per cent in August, after the labour market added a massive 121,000 jobs – a number that sparked an incredulous response from market analysts and economists.
The figures, which were much better than expected, follow a surprise spike in July to 6.4 per cent from 6 per cent in June. The participation rates also improved in August, from 64.8 to 65.2 per cent.
Economists were immediately sceptical about the massive surge in new jobs, which was the largest single month-on-month increase since the series started in 1978.
“The wise thing [in the July figures] would have been to take the exceptional weakness with a grain of salt,” UBS strategist Andrew Lilley said.
“This time the market should take the exceptional strength with a grain of salt.
“[The new job figure] is like saying the number of new jobs in the US is 1.5 million – it’s an insane number. It is a sample error,” he said.
In the US, which has about 314 million people, monthly new jobs have averaged about 200,000 during its economic recovery. A recent total of 142,000 disappointed markets.
Currency markets immediately welcomed the August data, bidding the Australian dollar up to around US92 cents from early-morning levels around US91.60. The local unit has been outside the US92-to-US95 cent range for the first time since late March.
In publishing the figures, the ABS said: “The ABS reported the number of people employed increased by 121,000 to 11,703,500 in August 2014, seasonally adjusted. The increase in employment was driven by increased part-time employment for both males – up 65,400 persons – and females, up 41,300 persons.”
Most economists had ascribed the July surge to changes in ABS survey methodology, arguing that most other labour market indicators – including jobs advertising – suggested a slightly more upbeat outlook.
The ANZ’s newspaper and online jobs ads series this week showed a 1.5 per cent month-on-month rise in August, taking year-on-year growth to 8 per cent.
Reserve Bank of Australia governor Glenn Stevens had alluded to this apparent disconnect with the ABS data, although he has also warned that the jobless rate is likely to stay at or above 6 per cent for the foreseeable future.
“The Bank’s assessment remains that the labour market has a degree of spare capacity and that it will probably be some time yet before unemployment declines consistently,” he said in comments around the RBA’s decision last week to hold the cash rate at 2.5 per cent.
JP Morgan economist Tom Kennedy agrees.
“It still does add to the theme that the labour market has softened a bit, which is consistent with the idea of sub-trend growth and pretty challenging domestic conditions,” he said on Thursday.
“One month doesn’t make a trend and you’ve really got to look at what’s been happening over the past few months.”