Unemployment may not be as bad as the Australian Bureau of Statistics data reveals, suggests a Commonwealth Bank economist who analysed other information sources after the recent volatility in the ABS labour market data.
According to Savanth Sebastian, economist for CommSec, the Department of Social Services released figures this week showing that the total number of people applying for unemployment benefits fell by 0.5% to 408,658 in October in seasonally adjusted terms. This marks the fourth consecutive monthly fall. The seasonal adjustment factor calculated by CommSec is similar to the one used by the ABS when determining monthly employment.
Since peaking at a four-year high of 435,177 in July 2013, and a more recent high of 430,250 in June 2014, the number of unemployment beneficiaries has fallen by almost 22,000 or 5.4% in the past four months.
Furthermore, job advertisements rose for the fifth consecutive month in October. The ANZ
Job Advertising Series show that job advertisements increased 0.2% over October. Job ads have now trended higher for 12 months and are up 7.5% over this period.
However, Sebastian says although this is more positive news overall, we are still not completely out of the woods.
“The good news is that the ranks of overall jobseekers have shown signs of easing over the past few months. The less positive news is that longer-term job seekers are still finding conditions tough. Unemployment may rise in the short-term but the damage should be limited given the lift in economic activity and recent trends that are emerging in the labour market.
“It is important to keep in mind that the number of short-term jobseekers receiving benefits rises and falls with the economic times, but the number of long-term unemployment beneficiaries is harder to move. So the lift in in long-term jobseekers is disappointing and highlights that the improvements in labour market conditions are incremental at present and by no means has reached critical mass.”
The main driver of employment growth must come from a lift in non-mining business investment, says Sebastian.
“The cost of borrowing is generationally low and the current environment provides businesses with an opportunity to position them for the lift in activity to come over the next couple of years. In addition wage growth is subdued and unlike the mining boom period, employers can get good skilled staff at a reasonable price.”
Overall, CommSec predicts unemployment will probably drift, rather than surge, higher over coming months before easing by the end of next year.