Australia Unemployment Rate
Unemployment rate is defined as proportion of working age population that are actively looking for work but is not currently employed. The current Australia employment rate is 5.8%. This is based on a trended series of unemployment data provided by ABS. The data is released monthly.
The unemployment rate is closely interrelated with economic growth, current interest rates, future interest rate expectations (news on interest rates) and inflation rates.
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The chart above shows the trend in the unemployment rate over the last 30 years. It peaked in the early 1990’s during “the recession we had to have” and it has been on a gradual decline ever since. Australia’s lowest unemployment rate in the period occurred just before the financial crises.
Since then the rate has gradually trended up however the overall level of unemployment in the Australian economy is not alarmingly high compared to other developed countries, especially those in the peripheral European Union.
Australia Participation Rate
No discussion on the employment rate is complete without including the participation rate. The participation rate is effectively a measurement of the proportion of population that is active in the labor force. A high participation rate means that a large portion of the population is working or actively looking for work.
By implication, a greater portion of the economy resources are deployed in generating income, supporting the social safety net and employed.
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Over the last 30 years the trend in the Australian participation rate has been unquestionably up.
This is primarily a secular trend due changes in cultural and societal attitudes towards women in the labor force. As increasing level of women enters the workforce, the aggregate level of participation rate increases.
As an aside, it is in our view that increasing female participation has contributed to a degree increase in capital city house prices in Sydney and Melbourne and the secular growth in house prices in the last 4 decades.
This is based on the fact that increase in house prices while outpaced the total wage growth for a single person has not increased as much for households with 2 incomes.
As Australia’s participation rate increases, total household income increased as well. Thus housing affordability for families with dual income has not deteriorated as much as single person income.
Therefore it is important to examine the potential risks of housing price bubble within the context of increase number of dual income households.
Unemployment Rate by State
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Chart above shows the unemployment trend in NSW, QLD, VIC and WA. We have excluded ACT, SA and NT due to smaller size and greater volatility in data series.
It is no secret that WA is the greatest beneficiary of the once in a generation commodity super cycle. The trend broadly follows the Australia unemployment rate with little variability between states aside from WA.