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Money This chart suggests Australian unemployment may get worse before it gets better

03:10  14 june  2018
03:10  14 june  2018 Source:   businessinsider.com.au

Why no one's really excited by the recent fall in Australian unemployment

  Why no one's really excited by the recent fall in Australian unemployment Australian unemployment tumbled to 5.4% in May, moving it closer to the level where some estimate that wage pressures will begin to build. Australian unemployment tumbled in May, falling to 5.4%, the lowest level since November last year.

But it ’s going to get worse , before it gets better . That’s the judgement of the Office for Budget Responsibility. Their latest forecast, published by George Osborne alongside the Budget, shows that unemployment will peak at 8.7 per cent and it will not fall until quarter three 2013

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Australian unemployment, as measured by the ABS, has risen since late last year.

It currently sits at 5.6%, reflecting the fact that the size of Australia's labour force has increased faster than employment over the past six months or so, leading to a modest increase in unemployment.

However, with economic growth picking up and lead indicators on employment remaining firm, many expect the recent trend will reverse in the months ahead.

But will it?

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Based on the chart above from Macquarie Bank, Australian unemployment may get worse before it gets better, at least based on Roy Morgan's separate measure on unemployment.

Your 10-second guide to today's Australian jobs report

  Your 10-second guide to today's Australian jobs report Australia's jobs report for May is about to be released. Australia's jobs report for May is about to be released.

We have heard it before — “ It is going to get worse before it gets better .” There is a truism to the statement, but what a thought to grasp and try to work through. Yet, some feel that it may get “even worse ” before it does get better .

Mark Doms of Nomura Securities has an interesting chart that explains some of this by breaking the unemployment rate down in demographically specific ways. Trump just made 3 shocking statements about North Korea Yes, even worse than normal. I got better .

Whatever the reason, when the latter is advanced by eight months, it has a reasonable relationship to changes in the ABS measure.

Yes, it's hardly perfect, but it's interesting nonetheless.

While the Roy Morgan series points to the risk that unemployment may lift further in the coming months, should the relationship be maintained, it also suggest unemployment may begin to fall again in the latter parts of the year.

Economists don't expect there'll be any improvement when Australia's May jobs report is released tomorrow with the median forecast looking for unemployment to remain steady at 5.6%.

Many, including the RBA, believe unemployment will need to fall to 5%, or below, before wage pressures will begin to build.

Australia, New Zealand dollars ease but set for weekly gains .
<p>The Australian and New Zealand dollars came off recent highs on Friday.</p>The Australian dollar (AUD=D4) was last down 0.2 percent at $0.7608 from a six-week high of $0.7677 touched on Wednesday.

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