Roy Morgan Research (RMR) last night released its unemployment estimate for the month of May, which registered a large fall in the unemployment rate to 9.7% from 10.4% in April (see next chart).
The result is due to a combination of seasonality (the RMR index typically falls in May), falling participation, and improving labour market conditions. Still, unemployment has fallen for three consecutive months and is at the lowest level since June 2013; although it remains 0.2% above the same time last year.
According to Gary Morgan:
“In May Australian unemployment fell for a third straight month to 1.186 million Australians (9.7%, down 0.7%). In further good news Australian under-employment fell to 993,000 Australians (8.1%, down 0.5%). Now a total of 2.18 million (17.8%) Australians are unemployed or under-employed – the lowest for a year since May 2013 (2.13 million Australians – 17.3%).
“However, although the fall in unemployment and under-employment in May appears like good news, a key driver of the falls was a drop in the total Australian workforce as many people either stopped looking for work or lost their jobs. Both full-time employment (7,504,000) and part-time employment (3,536,000) fell and the total workforce decreased to 12,226,000 – the lowest total workforce since January 2013 (12,139,000).
“The fall in the total workforce means Australia’s participation rate fell to 63.6% in May (down 1.6% since April). Australia’s participation rate is now at its lowest for nearly three years, since July 2011 (63.0%).
As explained previously, RMR measures employment differently from the ABS:
According to the ABS definition, a person who has worked for one hour or more for payment or someone who has worked without pay in a family business, is considered employed regardless of whether they consider themselves employed or not.
The ABS definition also details that if a respondent is not actively looking for work (ie: applying for work, answering job advertisements, being registered with Centre-link or tendering for work), they are not considered to be unemployed.
The Roy Morgan survey, in contrast, defines any respondent who is not employed full or part-time and who is looking for paid employment as being unemployed…
Since Roy Morgan uses a broader definition of unemployment than the ABS, it necessarily reports a higher unemployment figure. In addition, Roy Morgan’s measure tends to be far more volatile, owing to the fact that it draws on a smaller sample than the ABS and is not seasonally adjusted.
Both the official ABS unemployment rate and the unofficial RMR measure tracked each other closely until mid-2010 before diverging sharply (see next chart).
The reasons behind the big divergence between the RMR and ABS unemployment measures since mid-2010 remain a mystery, but probably has something to do with RMR’s picking-up discouraged workers.
In any event, the trend in the RMR survey suggests that the Australian labour market is improving, albeit slowly, which will hopefully also be reflected in the upcoming ABS employment release for May.
