Australian Employed Continues to Rise; Unemployment Rate Maintains Record Low

The Australian economy remains strong, as labor markets show favorable trends and GDP growth in Q2 was the best since late 2003. August's labor force survey included a gain in employment of 32,600, following July's 12,100. One forecast survey had expected the number of people employed to be flat in August. Indeed, a quick glance at the graph showing the monthly changes suggests that this would be a logical supposition: this current string of monthly increases is a long one, 12 months. Employment in Australia is characterized by a quite erratic monthly pattern, rather than the currently persisting increases. In fact, the length of this 12-month stretch has not been surpassed since 1980.

Other aspects of the data describe general strength in the labor market. Two months ago, we first saw the unemployment rate at 5%, a low for at least 28 years, and that has been maintained now for a third successive month. Further, the participation rate has hit another new high, 64.8%. Sometimes, a low unemployment rate only signals that people have withdrawn from the labor force, that they see few opportunities to work, so they reduce their participation. This is clearly not the case presently in Australia, with record participation, now also sustaining its current historic range for a third month; before this year, the proportion of the population working or wanting to work had only been more than 64% in five individual months since the inception of these data in February 1978.

Australian GDP, reported yesterday (September 7) also showed this strength in Q2. At a 1.3% quarterly increase, it was marginally higher than forecasts, which called for 1.2%. Business investment rebounded after a Q1 decline, with both construction and machinery experiencing large increases. Exports accelerated after slowing somewhat in Q1, while import growth eased, so that the net export deficit was a much smaller drag on growth than it had been in Q1. Consumer spending expanded at about the same 0.8% pace as in Q1. The nation's economy continues to benefit from the growth in China and from the worldwide increases in commodity prices; the mining sector in particular is seeing vigorous growth, along with petroleum refining and processing of nonmetallic minerals. Finance and parts of the transportation sector are joining in the gains.