Don’t be fooled by the fall in the unemployment rate in May – employment growth is still inadequate.
The unemployment rate came in at 5.5 per cent, down from 5.6 per cent in April.
It was a strange twist on economists’ expectations.
They had expected a rise to 5.6 per cent in May, from 5.5 per cent in April, but the April figures was revised upward to 5.6 per cent in the new data from the Australian Bureau of Statistics (ABS) on Thursday.
And despite virtually no change in the estimated number of people employed in May – up by an inconsequential 1,100 from April – the reported jobless rate was lower than expected.
That was because the proportion of respondents to the ABS survey active in the labour market – the so-called participation rate – fell from 65.3 per cent in April back to its March level of 65.2 per cent.
So, the reported unemployment rate was 5.5 per cent, down from 5.6 per cent.
Even then, the size of the fall is exaggerated by the rounding of these figures to the nearest decimal place.
Before rounding, the fall was much smaller, to 5.53 from 5.56 per cent, hardly a drop to write home about.
The best that can be said is that the jobless rate did not move significantly in May.
But, the underlying trend does appear to be upward.
In the three months ending May last year it averaged 5.10 per cent, but has risen steadily each three months to 5.22, 5.38, 5.40 and now – in the three months to May – to 5.56 per cent.
And that’s because the current rate of employment growth is not enough to offset underlying population growth.
There is a slight dropout rate from the labour market due to the ageing of the population. That is cushioning the blow from too-slow employment growth. But, that effect is being undermined by a tendency for older workers to lift their participation rates.
The current trend in employment growth is 9,900 a month, the bureau estimates, but it has to be somewhere around 15,000 to turn off the dripping tap torture of rising unemployment.
The net result is the upward creep in the jobless rate. Only by about 0.1 percentage points every three months or so, but definitely in the wrong direction.
