Friday, August 07, 2009

Eight per cent unemployment? Tell 'em they're dreamin'

Unemployment forecasts are being dramatically downsized and forecasts of interest rate hikes brought forward after news that employment has stabilised in the past three months with Victoria and NSW leading the nation, piling on an extra 22,000 and 29,600 jobs.

But full-time jobs are being replaced by part-time jobs at the fastest rate in almost two decades.

In the three months to July around 74,000 full-time jobs were replaced with part-time ones, the biggest switch since the early 1990's recession.

Employment Minister Julia Gillard hailed the switch as a victory for unions and Labor's commitment to industrial co-operation.

"It's reflection of the fact that many employers working co-operatively with employers and trade unions are striking innovative arrangements to keep people attached to work during these difficult days," she told a Melbourne press conference...

Victoria's unemployment rate fell from 6 per cent to 5.8 per cent in July and the national rate held steady at 5.8 per cent, while the number of hours worked slid a further 6.5 million.

Over the year to July the numbers of hours worked fell 2.9 per cent while the number of people in jobs climbed 0.1 per cent, meaning that roughly the same number of Australians were employed, but working 3 per cent less.

Ms Gillard said the shift showed employers had learnt from their mistakes in earlier downturns and hanging on to staff.

"In past downturns we have seen employers end up making people redundant and then as the economy has turned to growth desperately look for new employees," she said. "Employers have learnt from that are doing everything that they can to keep their valuable employees attached to their businesses."

But employment expert Bruce Chapman from the Australian National University said it wasn't that simple and there was no evidence that the workers being taken on in part-time jobs were the same ones who were losing their full-time jobs.

"We don't know whether people are being kept on. We don't have the evidence," he said.

The state-by-state breakdown shows that the Australians gaining jobs are in different states to the Australians losing them with Victoria and New South Wales gaining 51,600 jobs during three months in which West Australian and Queensland lost 28,400.

The former boom states have experienced a rapid reversal of fortune as Western Australia's unemployment rate has climbed from 2.3 per cent to 5.7 in a matter of months as Queensland's has shot up from 3.3 to 5.8 per cent, closing the gap with Victoria.

The Deputy Prime Minister was keen not to draw attention to the rapid improvement in Australia's two biggest states, stressing that "no part of the country is immune".

She said "even the most optimistic" forecasters expected unemployment to continue to climb, at that the government was still expecting 8.5 per cent by mid-2001.

But the pundits themselves yesterday hastily wound back their forecasts with IPAC Securities' Adam Carr saying the peak now looked like being "materially lower than the official 8.5 per cent forecast, and even mine of 7.25 per cent".

CommSec's Craig James saying he now thought the rate might even not hit 6.5 per cent.

"Corporate Australia is hiring, but cautiously," he said. "It's clear that Australia’s economists need to spend more time on the road listening to businesses than crunching numbers in their ivory towers."

ANZ economist Riki Polygenis said the Reserve Bank would now be "increasingly uncomfortable with its current cash rate, which is set for severe economic recession".

UBS economist Scott Haslem said his view that the Bank would wait until mid next year before hiking rates was now "under pressure".

The jobs news pushed the Australian dollar up above US 84.5 cents for the first time since September. It helped boost the share market by 1.4 per cent.

The Bank will update its quarterly economic forecasts this morning.

Sydney leads the way
as NSW pours on the jobs

NSW +29,600
Victoria +22,200
Tasmania -3,400
South Australia -6,000
Queensland -12,500
Western Australia -15,900

Employment growth April - July
Seasonally adjusted ABS 6202.0


* Australia’s unemployment rate of 5.8 per cent is the tenth lowest among the 33 developed countries. Norway has the lowest at 3.1 per cent, and Spain the highest at 18.1 per cent.

* In seasonally adjusted terms, the number of jobs rose 0.1 per cent in the year to July — yet the numbers of hours worked fell 2.9 per cent, as firms cut back overtime, put workers on short hours or told them to take leave.

* The unemployment rate hit bottom at 3.9 per cent in February 2008. Its record low was 1.6 per cent in November 1970, its record high was 10.9 per cent in December 1992.

Published in today's SMH and Age