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Dole recipients spend less time unemployed

photo credit: Nick.Allen

Labour market

       There is encouraging news on the job front. While the number of short-term dole recipients continues to rise, the number of long-term job seekers is still lower than a year ago – in fact, down by 3 per cent. 

       Figures provided by the Department of Education, Employment and Workplace Relations show that there were 391,607 job seekers in February, up by 98,500 people on a year ago. The number of long-term dole recipients is down by just over 4,665 people compared with May last year.

       Based on the data on unemployment beneficiaries, CommSec estimates that the core jobless rate currently stands at 3.4 per cent – crawling up from the record low of 2.6 per cent set in September.

What does it all mean?

        The bad news is that the weak global economic environment has seen the dole queue continue to grow over May. The good news is that while there have been significant layoffs over the last year, the number of longer-term dole recipients is still lower than a year ago.

        The fact that more long-term jobseekers are actually finding work compared with a year ago will be a source of great encouragement – not just to those who have recently joined the dole queue but for policymakers. For those who have recently lost jobs, the decline in long-term unemployment numbers will give them hope that they are facing just short-term dislocation.

       Importantly the latest round of data suggests that the Australian labour force is going through a stage of under-employment rather than unemployment. This has largely seen the core unemployment rate rise modestly from record lows of 2.6 per cent to only 3.4 per cent over the last nine months. Added to which the number of dole recipients is rising from a far lower base than a decade ago.

        Interestingly the Bureau of Statistics figures recorded 3200 less jobs over May, whereas the unemployment recipient numbers suggest the increase is closer to 12,500. Whichever way you look at it, the massive job shedding recorded overseas is not being reflected in the domestic labour market.

         The overall result suggests unemployment is unlikely to reach the heights forecast by Federal Treasury and policy makers. There is no doubt that consumer spending will be restrained by the drop in work hours but CommSec expects the impact on the economy will be much milder than in the past.

        Monitoring the size of the dole queue acts as a useful reality check on the state of the job market. In the last economic slowdown there were half a million on the dole queue and in the last recession the dole queue grew to almost a million people. Despite a far bigger job market, today the dole queue is just over 390,000 people

What do the figures show?

       The number of jobseekers filing for either Newstart or Youth Allowance rose by 12,500 in May to a 3½ year high of 391,607 people. Short-term jobseekers rose by 10,826 in May to 232,629 while long-term jobseekers rose by just 1,639 to 158,978.

<!–[if !supportLists]–>· <!–[endif]–>CommSec estimates in seasonally adjusted terms 391,824 jobseekers received unemployment benefits up 17,000 in May compared with April.

        The lift of almost 12,500 in the number of people filing for unemployment benefits in May compares with the Bureau of Statistics estimate that unemployment numbers rose by 3,200 people in raw or unadjusted terms.

       The number of unemployment beneficiaries is up by 98,500 people or 33.6 per cent on a year ago.

        The biggest rise in short-term job seekers in May was in Western Australia (9 per cent), followed by Victoria (up 5.5 per cent) and NSW (up 4.4 per cent). By contrast, short-term job seekers fell by 1.3 per cent in the Northern Territory.

        Using the data on unemployment beneficiaries, CommSec estimates that the jobless rate would have stood at 3.4 per cent in May – modestly above the record low of 2.6 per cent set in September.

        The current dole queue is around half of the level reached ten years ago. A decade ago 632,055 people were receiving unemployment benefits.

What is the importance of the economic data?

         The Department of Education, Employment and Workplace Relations (DEEWR) releases statistical information for the various types of labour market payments delivered by Centrelink. The “Labour Market and Related Payments Monthly Profile” publication covers Newstart Allowance, Youth Allowance, Mature Age Allowance, Partner Allowance and Widow Allowance.

        The DEEWR data provides an alternate guide on unemployment compared with the monthly data from the Bureau of Statistics. Less people filing for unemployment benefits signifies a tighter job market, pointing to higher demand for retail goods, homes and cars.

What are the implications for interest rates and investors?

        Businesses are cutting back on work hours and overtime and converting full time staff to part time. People may be holding onto their jobs, but if incomes are being pared back then they will continue to be careful about spending decisions.

        The mining states such as Western Australia are more exposed to the global downturn and understandably they are experiencing the biggest increases in dole recipients.

        
The Reserve Bank is likely to keep rates on hold in the near term. The economic data over the last month has not shown any further deterioration in the domestic economy. In fact the data has suggested a degree of stability is starting to take hold.

Source Savanth Sebastian, Economist, CommSec
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