Unemployment rate highest in five years at 4.6 per cent

Latest ABS Labor Force data has shown the unemployment rate is inching closer to a rate recently forewarned by the Reserve Bank.

Following an increase in July, the unemployment rate has again risen last month, with August exhibiting unemployment figures not seen since the height of the COVID-19 pandemic.

July 2021 saw a decrease to 4.6 percent after unemployment peaked at 6.9 per cent in 2020, remaining between five to six per cent over the next year.

The increase is likely to surprise economists, with the rate generally anticipated to hold steady. In saying this, the rise corresponds with slow productivity growth and weakened business activity amid a consistently tight labour market and stubbornly high inflation.

Unemployment and employment growth rates were noticeably closer, with August seeing 39,000 more people in employment and 28,000 more people in unemployment.

ABS head of labour statistics Sean Crick said: “This August we recorded a higher proportion of people who were previously not in the labour force moving to being unemployed, compared to recent years.”

He continued: “The growth in the size of the labour force resulted in the participation rate increasing by 0.2 percentage points to 67.1 per cent.”

Aligning with recent coverage of the increase in part-time worker demand, part-time employment rose by 46,000 people in August, while full-time employment fell by 6,000.

According to Crick, the 0.7 per cent increase in hours worked “is partly due to having more employed people working zero hours last month compared to usual July months”.

Further, trend unemployment grew by 0.2 per cent, while the trend underemployment and underutilisation rate remained steady at 6.3 per cent and 10.8 per cent respectively.

The rate is unlikely to change the RBA’s cash rate decision, which is predicted to rise for the fourth time this year.

Earlier this week, RBA governor Michele Bullock warned that it would take an unemployment rate of 4.5 to five per cent to reign in inflation, with employers urged to consider the impact on their existing workforce and future planning.

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