Can do better: Older workers find it tougher
Detailed employment data
Older workers find it tougher: In the year to April the unemployment rate for 55-64 year old Aussies was 4.2 per cent, up from 3.6 per cent back in 2013 and above record lows of 2.6 per cent.
The data on employment by industry gives insights into which industries are growing the fastest as well as insights on the performance of the broader economy.
What does it all mean?
• This week the Reserve Bank Governor said that Australia can do better on unemployment. Rather than being satisfied with a jobless rate of 5 per cent, Philip Lowe believes that unemployment can fall to perhaps 4.0-4.5 per cent before we start getting worried that the tighter job market will generate inflationary pressures.
• “My judgement of the accumulating evidence is that the Australian economy can support an unemployment rate of below 5 per cent without raising inflation concerns. This would be consistent with the experience overseas, with many other advanced economies sustaining lower rates of unemployment than previously thought possible without leading to a noticeable uplift in inflation.”
• So the RBA Governor said a rate cut would be considered at the June Board meeting.
• While some economists have been tipping lower interest rates, none identified the reason for lower rates. The Reserve Bank isn’t cutting rates because the economy is flagging badly or because of overseas factors or even because Sydney and Melbourne home prices have eased. Rather the RBA has now come to a judgement that the ‘new world order’ of globalisation has caused changes in the nexus between unemployment and inflation. The greater mobility of goods and workers across national boundaries now means that the jobless rate can fall further without generating inflationary pressures.
• It is now a case of looking closer at regional and demographic groups to find out precisely where we could be doing better in the job market. And it emerges that while older Australians have been more active in the workforce in recent years, they have become less successful over time in finding work. The harder question is working out why, but reasons could include a need for retraining given technological change or the cost of labour.
What do the figures show?
• In the year to April, a record 66.8 per cent of those aged 55-64 years were either in jobs or looking for work (participation rate). A decade ago the participation rate was near 60 per cent.
• But more senior Australians are out of work than a decade ago. The jobless rate for 55-64 year old workers averaged 4.2 per cent over the past year. While seemingly low, it is up from 2.8 per cent a decade ago.
• For all other demographic groups, the annual average unemployment rate is below the decade average. For workers from 35 years up to 55 years, the average jobless rate is near 3-6-3.7 per cent. Five years ago, jobless rates were higher – in fact averaging 4.8 per cent for Aussies in their 30’s.
• The other good news is that Aussies are more active in the workforce. Participation rates are at record levels over the year to April for the following groups:
Workers 25-34 years (participation rate 84.3 per cent)
Workers 35-44 years (85.4 per cent)
Workers 55-64 years (66.8 per cent)
Workers 65 years and over (14.2 per cent)
And just off record highs for workers 45-54 years (83.8 per cent)
• Across Australia, rolling annual average jobless rates fell in five of eight states and territories over the year to April: NSW 4.5 per cent (4.8 per cent in April 2018); Victoria 4.7 per cent (5.7 per cent); Queensland 5.9 per cent (6.2 per cent); South Australia 5.7 per cent (6.0 per cent); Western Australia 6.2 per cent (6.0 per cent); Tasmania 6.2 per cent (5.9 per cent); Northern Territory 4.4 per cent (4.0 per cent); ACT 3.6 per cent (4.1 per cent).
• While the Reserve Bank can feel comfortable about jobless rates in NSW, Victoria and the ACT, significant scope for improvement exists in other states and territories.
• While ‘natural’ rates of unemployment will vary across the country, when the Reserve Bank Governor says we can be doing better, everywhere but the south-east corner of the country is in his sights.
Why is the data important?
• The Australian Bureau of Statistics (ABS) provides detailed labour market figures one week after releasing ‘top level’ statistics of employment & unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy.
What are the implications?
• If people are more active in the job market, there are implications for a raft of industries including public and private transport services & infrastructure; housing; retail; planning areas of local and state governments; and education & training.
• The national jobless rate has trended to near decade lows. But the forward-looking indicators are suggesting that the jobless rate may stop falling. The question is how much of a role the election played. Businesses certainly wound back activity awaiting the election result. Companies could be expected to get back to business very quickly.
• CommSec expects a rate cut to be delivered in June while another could occur in August. Low inflation and modest wage growth means an extended period of low interest rates. But low rates can only do so much, especially in regions still struggling with post mining boom blues. Structural issues need to be explored at a regional and demographic level. The Federal Government’s ‘congestion-busting’ infrastructure initiatives will help.
Published by Craig James, Chief Economist,CommSec