What you need to know about unemployment in Australia

Investors need to understand that while unemployment is rising, so too is employment, according to CommSec chief economist Craig James.

Although there was a marked increase in job lay-offs over the three months to February 2009, employment actually rose by 1500 people, with 11 out of 19 industries actually adding jobs over the same period, James says.

“While some businesses are laying off workers, others are putting on staff,” he says. “The data confirms that the unemployment rate is rising because not enough positions are being created to absorb new entrants.”

James notes that the health care, community services, utilities and retailing sectors all added workers over the three months to February 2009, while skilled professional and technical positions were lost.

“The truth is that while businesses did axe positions over the past three months, there was also a fair bit of hiring of new workers,” James says.

“What many analysts have lost sight of is the fact that the Australian economy is in fundamentally different shape to economies in other parts of the globe. While some businesses do need to trim positions, it’s by no means a uniform phenomenon.”

James says some part-time workers who’d prefer to secure longer hours over the coming year will be unsuccessful and there’s no doubt that unemployed people are finding it harder to get work.

However, he says that if the United States Government can put its economy back on track, the impact will flow through to Australia quickly.

“If the Obama administration is successful in stabilising the US banking system and restoring global confidence, Australia is likely to be one of the first countries to bounce back, given the fundamentally stronger position of its economy and financial institutions,” James writes in a briefing note.

“If employers respond by starting to hire workers again, then forecasts of a 6.5 per cent unemployment rate will prove too pessimistic.”