Longterm Unemployment

Surprise drop in unemployment rate eases pressure on RBA

The number of people employed rose by 37,400 to 11.67 million in December, against market expectations of 5000 newly employed. Photo: Tamara Voninski via Sydney Morning Herald

Australia’s unemployment rate unexpectedly dropped in December, surprising economists and easing pressure on the Reserve Bank of Australia to cut interest rates this year.

The Australian Bureau of Statistics said on Thursday that the number of people employed rose by 37,400 to 11.67 million in December, against market expectations of 5,000.

This took the official unemployment rate to 6.1 per cent from a revised 6.2 per cent in November, while the participation rate climbed from 64.7 per cent of the population to 64.8 per cent.

The figures were much better than expected, and the Australian dollar surged more than half a US cent on the news, to above US82.06 cents.

Economists immediately began re-examining their forecasts for cuts in the RBA’s 2.5 per cent cash rate this year, although many were cautious about the longer-term trend, the broader economic health of Australia, global factors and the reliability of the ABS labour force series. This was called into question last year after wild, inexplicable gyrations in the numbers from month to month.

“Again, based on errors from last year the data may not be as significant as it reflects,” said Quay Equities in note.

“However, on the data we do have it is a good yet volatile number, [which] probably gives the RBA the scope to delay any short term interest rate cuts,” Quay said.

Market expectations of rate cuts also eased on the jobs data. According to Credit Suisse, the chance of a quarter percentage point rate cut at the next RBA meeting early next month halved, from 19 per cent to 9 per cent on Thursday.

Immediately before the jobs data, traders were pricing in a more than 25 per cent chance of a cut.

The market still fully expects at least one rate cut this year, but the chance of an additional one has dropped to 44 per cent from 64 per cent.

Bank of America Merrill Lynch economist Alex Joiner agreed, saying the result “clearly reduces pressure, which may have been building, for the RBA to ease policy in the short term”.

However, he also warned that the drop in unemployment could be short-lived.

“We continue to expect that the unemployment rate will rise in 2015, reaching a peak just over 6.5 per cent,” he said.

“In our view, this will be due to a combination of cyclical weakness and structural adjustment away from the resources sector.”

Despite yesterday’s figures, most Australian-based economist still expect a subdued growth rate this year, with falling commodity prices threatening jobs, government revenues and the profitability of numerous resource-related companies.

Australia and New Zealand Banking Corporation chief economist Warren Hogan said weaker growth and lower inflation in 2015 would “provide the RBA with a reason and the scope to take the cash rate down 50 basis points to 2 per cent over the first half of the year”, although the rate cut timing was revised to later in the year after the jobs data…

Read more by Mark Mulligan, Sydney Morning Herald 15 January 2015

 

long term unemployment logo aprilThe Australian Long-Term Unemployment Conference will be held on the 9 -10 November 2015 Pullman on the Park, Melbourne. Visit the conference website for more information.

Australia’s jobless hotspots: where does your suburb rank?

Map

Image: The New Daily

The transitioning economy is behind staggering pockets of unemployment.

Unemployment rates in some Australian suburbs are as high as 32 per cent, five times the national figure, creating pockets of disadvantage and leaving local councils scrambling to create jobs.

Both inner-city suburbs and remote towns feature in the top-10 areas grappling with high unemployment rates, with mayors saying they are struggling to provide jobs amid a decline in manufacturing.

Unemployment figures have skyrocketed in some suburbs in the past year, with Melbourne’s Broadmeadows and Brisbane’s Wacol both experiencing an almost 40 per cent jump in unemployment in 12 months.

Broadmeadows in Melbourne’s north-west has an unemployment figure of 26 per cent, and has been rocked by the steady closure of local manufacturing since the global financial crisis in 2008, including more factory closures in the past year.

The current national unemployment figure is 6.1 per cent.

A source at the local Hume City Council said long-term disadvantage and the closure of the local Ford plant were to blame for unemployment in the area.

“The impact of the pending closure at the Ford plant in Broadmeadows, and the flow-on it has had on other supporting manufacturing industries has also played a part,” they said.

Read the full story by Ebony Bowden, The New Daily, 29 October 2014.

Needs a better basis of help

WHEN every government decision is marketed as “reform”, it’s hard to distinguish real reform from short-term budget fixes such as depriving young people of unemployment payments for six months, a requirement to search for 40 jobs a month, and payment cuts for low-income families.

These ideas came as a shock to community organisations and affected people and attracted widespread opposition.

In the middle of this, the government’s welfare review panel released a report on, among other things, reform of payments for people of working age. ­Despite the real concerns we have about many of the government’s recent social security policies, the Australian Council of Social Service is participating in the review because it’s an ­opportunity to solve longstanding problems.

This is where the government should have started: with a properly structured social security review that identified the problems to be solved, and worked with the community to find the solutions. That’s how reform is usually achieved…

It’s time for the government to reset its social security policies and reform the safety net instead of shrinking it.

This is an extract of a speech which Australian Council of Social Service CEO Cassandra Goldie will deliver today at the Australian Long-Term Unemployment Conference 2014 on the Gold Coast.
View the extract on the Australian – here