Western Australia's unemployment rate has dropped to 3.1 per cent for July 2006, another significant fall from the record low of 3.5 per cent recorded in June as the state's booming economy continues to create jobs.
Western Australia's unemployment rate has dropped to 3.1 per cent for July 2006, another significant fall from the record low of 3.5 per cent recorded in June as the state's booming economy continues to create jobs.
The WA unemployment rate announced this morning was down 0.4 per cent from the seasonally adjusted 3.5 per cent of June. The latest figure is the lowest ever recorded since the current Labour Force series commenced in 1978.
Nationally, the unemployment rate was 4.8 per cent, down 0.1 per cent from 4.9 per cent, while the WA participation rate remained at 67.7 per cent.
The strong national jobs figures may increase the risk of further interest rate rises, suggested BankWest economist Alan Langford.
"Today's jobs data will have done nothing to allay the RBA's concerns about the lack of spare capacity the Australian economy has to play with as the upside inflation risks the central bank had identified earlier this year crystallise into higher actual inflation," Mr Langford said.
A total of 20,100 new full-time jobs were been created in WA in July, with the biggest increase being in female employment with 11,800 full-time jobs.
Western Australia has been able to maintain unemployment levels at or below 5 per cent since June 2004 and Premier Alan Carpenter said 152,600 new jobs have been created since the election of the WA Labor Government in 2001.
Except for the ACT's 2.8 per cent unemployment, WA continues to lead the nation's jobless figures, with Queensland the next best at 4.5 per cent.
In a statement, Mr Carpenter said the extraordinary rate highlighted the success of the WA economy and the opportunities that were available across the State.
Below is an economic commentary from HBOS's WA-based economost Alan Langford at BankWest:
Today's upbeat labour force report for July comes hot on the heels of a clutch of central bank meetings in the last week or so, three of which (including our own) resulted in 25 basis point increases in official cash rates.
Today's jobs data will have done nothing to allay the RBA's concerns about the lack of spare capacity the Australian economy has to play with as the upside inflation risks the central bank had identified earlier this year crystallise into higher actual inflation.
The headline (ie seasonally adjusted) unemployment rate fell by 0.1 of a percentage point in July, to 4.8 per cent, as ...
Another month's strong growth in employment (51,000) was more than enough to absorb a 0.2 of a pp increase in the participation rate, to a new historical high of 65 per cent.
Full-time employment grew by 27,000, and part-time by 24,000
Trend full-time employment grew at 0.3 per cent for a fifth month on the trot in July, after contracting or growing at negligible rates in the second half of last year.
The ABS advises that the July employment data "may" include some employment generated by the progressive training of staff recruited by the ABS itself to conduct this week's 5-yearly population census. But the August reading will be where the temporary census effect shows up. The ABS estimates that the 1996 and 2001 censuses caused a temporary jump in employment of 10,000 persons in August of each of those years.
It is unlikely that the census effect in July would have caused anything more than a minor blip in the readings for July, so the report very much confirms that the labour market is one of the key examples of an Australian economy with precious little spare capacity.
So if today's data does in fact increase the risk of another cash rate increase this year (which it does), how does that reconcile with the 'maintenance of full-employment' part of the central bank's charter? The RBA's line is that sustainable employment growth is best achieved in an environment of low, so raising the cash rate a bit before higher inflation becomes entrenched is better for jobs growth in the medium to longer-term than leaving inflation to fester and having to raise the cash rate a lot down the track.
The bank bill futures market was already a bit weaker ahead of the jobs data, but has since sold off by between 3 and 5 basis points. The implied yield on the most actively traded (December) contract is up by 7 basis points since yesterday's close, at 6.37% pa.
The bond futures market is also significantly weaker today than at yesterday's close. Implied yields on the 3-year contract opened 4 basis points up in response to a modest rise in US bond yields overnight, but have risen by another 6 basis points since the labour force data hit dealers' screens.
The RBA judged, in its August quarterly Statement on Monetary Policy that the risks to its inflation forecast ? "appear evenly balanced", but between the May and August Statements they revised up their forecast for underlying inflation, from 2¾ per cent for the second half of 2006 and throughout 2007 to "around 3 per cent" out to the middle of 2008. Accordingly, given that the Statement was liberally sprinkled with upbeat assessments of global and domestic economic growth, the room for upside error on the central bank's inflation forecast is wafer thin.
So unless something derails the global economy in the next few weeks, it seems more likely than not (say something in the order of 70 to 30 odds) that the RBA will need to take out a bit more insurance, most likely in November after the late October publication of the September quarter CPI.
The risk of the lagged effect of the May and August cash rate increases and the prospect of another one collectively unsettling the still fragile eastern Australian housing market may also obviate the need for another cash rate increase, but if you were a fly on the wall in the RBA's bunker, you would probably hear a judgment call that the risk of allowing inflation to run up too far too fast outweigh the risk that one too many too soon cash rate increases triggers the very sharp fall in house prices the central bank has been so keen to avoid for so long - at least since it raised the cash rate in each of the final two months of 2003.
The Fed was the odd one out when it elected to leave the funds rate unchanged at 5.25% pa on Wednesday night, after increasing it by 25 basis points at each of its previous 17 meetings. The Fed's pause, coupled with today's labour force data that increases the risk of further tightening of monetary policy by the RBA, has propelled the Australian dollar higher across the board as prospective short-term interest rate differentials (both short and long-term) increase the relative attractiveness of Australia as a parking spot for footloose global capital flows.