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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 15 July 2016

Unemployment rate 5.8 per cent in June

Full time jobs

A solid result from the ABS June Labour Force release with employment increasing by +7,900 to 11.94 million. 

The result was driven by a strong +38,400 increase in full time employment, while the rotation and composition of the surveyed sample suggested that the result could be more robust again than implied.

The economy has added well over half a million jobs since a protracted lull at the end of 2013. 

Over the past year total employment has increased by +225,000 or +1.9 per cent, which compares favourably to a population growth rate of around +1.4 per cent. 

However, the year-on-year growth in employment has been sliding since the beginning of calendar year 2016. 

The seasonally adjusted unemployment rate was 5.8 per cent, while the trend unemployment rate of 5.73 per cent was the lowest in 33 months. 

As an interesting point of note, the participation rate at the end of 2013 was 64.5 per cent, but conditions have generally improved since that time, and today the participation rate is higher at 64.9 per cent.

Every month the cranks dispute the figures, of course, but it's important to note there is no genuine mystery or conspiracy here: the ABS figures are based on a survey sample, and the Bureau's disclosed methodology aligns closely with the standards laid down by the International Conferences of Labour Statisticians.

Moreover, if you bother to read the full release the picture becomes somewhat clearer, but sadly few bother to scan beyond page one! 

Naturally the monthly figures have an inherent volatility because they are estimates based upon a sample survey - the reported standard errors and confidence intervals provide a measure of sampling variability. 

Big cities dominate growth

In recent times, employment growth has been utterly dominated by the largest capital cities - and particularly Sydney and Melbourne.

Victoria (read: Melbourne) notched up another net +24,200 to its total employment in June. 

Over the past year New South Wales (+117,100) and Victoria (+101,000) have accounted for almost all of the net increase in employment. 

On the other hand, in the southern states of Tasmania and South Australia there remain fewer employed persons than there were half a decade ago. 

The state unemployment rates are particularly volatile from month to month. The trend results are plotted below, with the trend unemployment rate continuing to decline in New South Wales to 5.22 per cent.

Meanwhile the trend unemployment rate in Victoria has declined from 6.81 per cent in September 2014 to just 5.66 per cent, for a marked improvement.

The above figures do need to be read and understood in the context of the underlying data, however, such as the split of full time and part time employment, participation rates, and hours worked.

For example, the seasonally adjusted participation rate in Western Australia of 67.4 per cent remains well above the national average, but is the lowest result recorded for the state since April 2005. 

So while the recent decrease in the state's trend unemployment rate from 6.3 per cent to 5.6 per cent is welcome, the underlying figures are not indicative of a thriving labour market. 

The wrap

Overall this was a steady result, which reconfirmed that Sydney and Melbourne are leading the post-mining boom economy forward. 

The increase in full-time employment was welcome - not to mention overdue - but the average number of hours worked per person has been declining lately.

I'll take a look at the underlying data in a bit more detail later early next week.