Australia’s unemployment rate has unexpectedly – but welcomely – fallen to 6.1% in December, according to the latest Australian Bureau of Statistics labour force figures.
Economists were predicting the unemployment rate would remain steady at its 12-year high of 6.3% in the lead up to the release of the official figures, however it dropped 0.1% from a downwardly revised 6.2% in November.
The number of jobs added in December was 37,400 – significantly higher than the market prediction of 5,000. Full-time jobs rose by 41,600 while part-time jobs fell by 4,100.
However, CommSec’s chief economist Craig James says it's important to remember that the monthly data on employment and unemployment is backward-looking before celebrating the surprise result.
“The outcomes reflect decisions made by businesses up to 5-6 months ago. So the fact that more than 80,000 jobs have been created in two months is encouraging, however we have doubts about the strength of recent job gains. Still, the data does line up with taxation data suggesting more people are in work and paying tax.”
Forward-looking indicators however, says James, are showing healthy signs of growth for the labour market – which is what really matters.
“More important for investors and policymakers is what lies ahead. Job vacancies are at 2-year highs and job ads have lifted for seven straight months, so the outlook is positive. Add in the fact that home building is continuing to lift with building approvals at record highs. And lower petrol prices will reduce business costs and lift spending – both positive for jobs,” he said.
CommSec still expects the Reserve Bank to remain on the sidelines at its first meeting of the year in February.