Australia | Mar 23 2009
By Chris Shaw
Having taken a detailed look at Australia’s labour market Commsec chief economist Craig James points out there is actually a lot more going on than the fact unemployment is trending higher, as over the past three months the majority of industries have actually put on additional workers.
This has particularly been the case in the healthcare, community services, utilities and retailing sectors, while skilled professional and technical positions have been cut along with jobs in real estate and the mining sector.
James’s analysis of the period shows while the number of job lay-offs rose, so too has the number of people leaving their job voluntarily, which he notes generally only happens when these people believe they have a reasonable chance of finding another position.
For the three months to the end of February James notes just less than 130,000 people were laid off, while over the same period almost 54,000 made their own decision to leave their positions. This second measure is at a record high, with one possible explanation for the spike in James’s view being the attractiveness of voluntary redundancy packages being offered that in some cases are simply too good to ignore.
Having said that, James doesn’t expect this level of workers voluntarily leaving their jobs being maintained in coming months unless other positions are already lined up. New job entrants may make this trend less likely, as for the three months to the end of February the number of people looking for their first job hit an eight-year high, though as a proportion of the total number of unemployed this measure was the lowest result for the past five years.
This reflects the other curious fact about the Australian labour market at present, in James’s view, which is the lack of any evidence of former workers returning to the workforce to search for jobs as this measure is currently at its lowest level for more than 20 years.
As James points out, the fact the Australian population and its workforce is getting older means there is a more limited supply of available labour. This suggests those businesses too aggressive in cutting staff now could look back to regret the decision over the coming year.
Overall James takes the view the activity in the Australian labour market in the past few months reflects the fact the Australian economy is in different shape to many of its global peers, so the ongoing improvement with respect to flexibility in the workforce should mean a peak in the unemployment rate well below that being forecast by many economists.
Evidence of this flexibility comes in looking at the split between full-time and part-time positions. At the end of February full-timers accounted for just 70.9% of total employment, the lowest ever recorded, while the past three months has seen full-time positions cut by 65,900 against a 68,100 increase in part-time positions.
While part-time positions are near record highs, so too are hours worked in such jobs, showing businesses are getting smarter in terms of meeting their labour requirements. James suggests it is this fact that will keep unemployment lower than some are forecasting. His forecast is for a peak unemployment rate of 6.5-6.75% sometime in 2010, which is well below estimates of an unemployment rate of well above 7.0% next year.
Of note, James suggests if the Obama administration is successful in stabilising the US banking system and restoring global confidence this forecast of 6.5% unemployment could well prove to be too pessimistic.