Don’t panic, RBA: low unemployment is a good thing

In some excellent news, the Bureau of Statistics estimates that Australia’s unemployment rate remained at 4.1% in January.

Before we go any further let’s just enjoy the current state of Australia’s labour market.

Let’s say you are turning 67 this year and you look back over the 50 years of your working life, when you started working as a 17 year old back in February 1976. In just 44 of the next 600 months of your working life would the unemployment rate would be 4.1% or lower.

And here’s the even more amazing stat – 41 of those 44 months of unemployment at 4.1% or lower occurred in the past 3 years.

That is something worth celebrating. It is also something worth fighting to keep. Australia should not accept higher unemployment as being necessary.

I note this because you can bet that the low unemployment figures will be reported as a sign that interest rates will have to go up again. The AFR immediately ran with “Tight jobs numbers keep rates pressure on RBA”. And please. Spare me.

Just yesterday the latest wage growth figures showed that wages in the past year rose slower than inflation!

Recent research by The Australia Institute has also shown that wages growth has not been the cause of the rising inflation.

That shows that we can have unemployment around 4% and wages growth below 3.5%. That is absolutely a great state of affairs, and the suggestion that the RBA needs to raise rates because unemployment needs to go higher in order for wage to grow even slower than inflation is a disgusting perversion of economics.

All those commentators are really doing is trying to justify lower wages and higher profits.

Enough!

Ok, let’s look closer at today’s figures.

The seasonally adjusted rate actually fell very slightly (less than 0.1%pt so it doesn’t really register) but the 2 months of 4.1% unemployment has seen the trend rate (which averages out things over the past 12 months) dropped from 4.2% to 4.1%:

In January employment grew by 17,800, which is not a huge amount – just 0.1%, and it meant annual growth was pretty weak 1.0%

 

Most of the increased work was for men, and specifically for male teenagers.

In January male employment for 15-19% rose 3.7%:

 

In December, male teenage work jumped 15,100 – so that made up 85% of all the increase in employment in January. That’s a pretty big slice of the employment growth given males aged 15-19 account for just 3% of all workers.

It also suggests that February or March will likely see an increase in unemployment as job growth based purely on teenage males is not exactly sustainable.

It also suggests that the RBA should not look at these figures and panic that this low unemployment is about to set of a huge wage breakout. We already have data that shows that is not the case, and it is time low unemployment is viewed as a good thing and not something to worry about.