Posted: February 09, 2006

Labour market stagnates!

The Australian labour market continues to stagnate with today's ABS data showing a rise in the national unemployment rate.

The January 2006 Labour Force Survey shows that employment is dropping and the unemployment rate is rising.

While total employment increased by 1,800 to 10,034,500, part-time jobs, which have driven the employment growth in recent years fell. Full-time employment increased by 30,500 while part-time employment decreased by 28,700 in the month of January. This rise in the unemployment rate has also been at odds with what the so-called 'markets' had been predicting.

The following data is summarised from the ABS release today and relates to seasonally adjusted data.

Labour Force category   December 2005  January 2006  Jan 05 to Jan 06
Employed persons (000)     10,032.7      10,034.5         1.6%
Unemployed persons (000)      549.9         556.8         5.1%
Unemployment rate (%)           5.2           5.3         0.2 pts
Participation rate (%)         64.4          64.4         0.3 pts

It means that the trend in unemployment is now up again and with a general slowdown continuing in economic activity the situation will worsen. If the unemployment levels rise over the next 12 months as these trends suggest then the heavily indebted household sector will struggle to meet their interest servicing. Then the spiral of insolvency will begin in earnest. The economy will then start to feel the impacts of the fiscal drag arising from the nonsensical budget surpluses that the Federal Government is intent on pursuing. Before too long they will have a deficit on their hands if the economy unwinds and the debt holdings explode.

My bet is that the Reserve Bank will continue to be very cautious about interest rates until the labour market trends are more clear. They now know, despite their protestations a few years ago to the contrary, that the levels of household indebtedness are unsustainable and that small rises in interest rates may have severe impacts on household solvency.

As to the frequency of the blogs - life is busy at the moment and we are overstretched (a little more than usual).

Blog entry posted by bill