Jobless rate falls to 5.6% on shift to part-time work

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The unemployment rate has dropped from 5.7% in August to 5.6%. Full time work has continued falling and has been offset by increased casual hires. Full time employment dropped by 53,000 and part-time work rose 43,200. The participation rate has also fallen from 64.7% to 64.5%.

How does this relate to the HSC syllabus?

  • A decrease in unemployment means that the number of people unemployed over the number of people in the labour force has decreased (HSC Topic 3 – Economic Issues). At face value, the improvement in the unemployment rate reflects a growing economy as labour is a derived demand (Preliminary Topic 4 – Labour Markets).
  • The reduction in the unemployment rate, however, may not be a result of growth in the economy. Rather, it may be better explained by the decrease in the participation rate. The participation rate is the proportion of the working age population who are in the labour force (HSC Topic 3 – Economic Issues). A decrease in the participation rate is most likely a result of discouraged workers who have been unemployed for a long period of time and have left the labour force as a result of the inability to find employment. This means that the unemployment rate is decreasing as a result of a reduction in unemployed people who are leaving the labour force, rather than an increase in people becoming employed.
  • The simultaneous increase in casual hires and falling full time hires is demonstrative of the casualisation of labour trend in the Australian labour market. Given the tentative growth in the economy recently, employers are more reluctant to employ people full time as full time hiring entails more obligations such as holiday pay, superannuation and stricter employment laws.

Australian dollar roller coaster on oil, jobs data

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The Australian dollar surged above $US0.77 before falling after release of jobs data. After employment data was released, the dollar dropped 0.8%, with investors contemplating how the RBA will respond to the labour market. The strength of the Australian dollar can be attributed to slightly stronger commodity prices and release of Chinese economic growth data.

How does this relate to the HSC syllabus?

  • Chinese economic growth was reported to be 6.7% for a third straight quarter. This positively impacts Australia’s growth prospects, as a majority of Australia’s exports are directed towards China (HSC Topic 2 – Australia in the Global Economy). Strong growth in China implies an increase in Chinese income that can be used on Australian exports. Since exports are a factor in aggregate demand, Australian economic growth will simultaneously increase (HSC Topic 3 – Economic Issues). As a result, investors bought the Australian dollar which caused demand to increase, expecting it to appreciate off the back of this growth.
  • Commodities make up a significant portion of the composition of Australia’s trade (HSC Topic 2 – Australia in the Global Economy). Previously, weak commodity prices suppressed the Australian dollar as foreigners did not need to demand as much Australian dollars to purchase the same unit of exports. Furthermore, weak commodity prices implied weaker growth for Australia as a result of a reduction in exports, causing investors to sell Australian dollars in anticipation of a depreciation. This caused an increase in supply of Australian dollars, leading to a weaker dollar.
  • The dollar depreciated in response to labour market news. This signals that investors viewed the labour market data as soft despite a reduction in the unemployment. This supports the idea that the reduction in unemployment was not caused by an increased in the number of people unemployed, but a reduction in the participation which indicates weakness in the economy.

Theresa Dang THERESA DANG

Theresa Dang is an economics mentor at Keystone Education. She attended Sydney Girls High and achieved an ATAR of 99.70 in 2012. She is now studying Commerce and Law at the University of Sydney. She has experience in a global technology firm and a mutual fund.

Gary Liang GARY LIANG

Gary Liang is the founder and director of Keystone Education. He attended Sydney Boys High and achieved an ATAR of 99.95 in 2012. He achieved 5 state ranks in Mathematics, Mathematics Ext 1, Mathematics Ext 2, Chemistry and Economics. He is now studying Economics and Science (Advanced Mathematics) at the UNSW Australia, where he is the recipient of four scholarships.

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