Jobs up but recovery to remain bumpy

Labour Force

Employment rose by 114,700 in July after rising by a record 228,400 jobs in June (previously reported as a 210,800 increase). Full-time jobs rose by 43,500 and part-time jobs rose by 71,200. Economists had tipped a 30,000 lift in jobs.

The unemployment rate rose from 7.4 per cent to 7.5 per cent in July – the highest jobless rate in 22 years but well below economist’s forecasts of 7.8 per cent.

Hours worked rose by 1.3 per cent in July but are down by 5.0 per cent over the year.

Participation rate: The participation rate rose from 64.1 per cent to 64.7 per cent in July.

Spare capacity: In July, the underutilisation rate fell from 19.1 per cent to 18.7 per cent. The underemployment rate decreased from 11.7 per cent to 11.2 per cent.

Unemployment across states in July: NSW 7.2 per cent (June 6.9 per cent); Victoria 6.8 per cent (7.5 per cent); Queensland 8.8 per cent (7.7 per cent); South Australia 7.9 per cent (8.8 per cent); Western Australia 8.3 per cent (8.7 per cent); Tasmania 6.0 per cent (6.9 per cent); Northern Territory 7.5 per cent (5.7 per cent); ACT 4.6 per cent (5.1 per cent). Biggest job gains occurred in New South Wales (up 56,800); Victoria (up 22,900); and Western Australia (up 19,100).

A raft of companies is affected by the employment data but especially those dependent on consumer spending.

What does it all mean?

• In tough times they say you should celebrate the small victories the hardest. And that is the case today. Jobs rose more than expected. The number of hours worked rose. The jobless rate just inched higher rather than leaped. And underemployment and underutilisation both fell.

• But we know that there is a long way to go, especially incorporation of the effects of both stage 4 and stage 3 lockdown restrictions in Victoria. Tightening of border rules will also constrain the economic recovery in some regions. The Reserve Bank is still tipping a 10 per cent jobless rate peak. Commonwealth Bank (CBA) Group economists are tipping a 9 per cent peak. Here’s hoping we are both wrong and JobKeeper works even better-than-expected in keeping the jobless rate down.

• The quicker that the jobless rate peaks and starts falling, the less damage and scarring will be done to the longer-term health of the economy.

• There is a lot of noise in the latest labour force release. If we were to literally believe the figures, the Victorian and Tasmanian jobless rates slumped in July while soaring in Queensland and Northern Territory. Smoothing out the results over three or four month averages may be a better approach to tracking trends.

• The fact that people are putting in more hours or work and more people on JobKeeper and JobSeeker are slowly returning to work should be celebrated. But as always, now we move on. It is a very fluid situation.

• The latest job data coincides with more data on job ads from SEEK, showing another 2.3 per cent lift in vacancies in July.

Published by Craig James, Chief Economist, CommSec