Unemployment Down, Aussie Dollar Up

Australia’s unemployment rate has unexpectedly fallen to 6.1 per cent, with the dollar receiving a boost on the back of the jobs news.

The latest figures from The Australian Bureau of Statistics (ABS) show that 37,700 people found work in March this year, bringing the total number of employed people to 11.7 million.

The ABS also estimated that 31,500 of those jobs were full-time and 6,100 were part-time.

Treasurer Joe Hockey shared his relief upon seeing the figures via Twitter. He said that the figures were welcome news.

Very positive jobs data for March. Welcome news for Australia. More work to be done…

— Joe Hockey (@JoeHockey) April 16, 2015

The Australian dollar jumped more than half a US cent to 77.77c after the figures were released.

But Honorary Professor at the Industrial Relations Research Centre at UNSW Australia Business School, Raja Junankar, wrote in The Conversation that youth unemployment was still a pressing concern.

Junankar said that in February this year youth unemployment hit 13.9 per cent, its highest level since 1998.

He argued that a rise in minimum wages would not increase unemployment and restricting unemployment benefits to young people would not drive it down.

“Business lobbies, and some politicians argue youth unemployment is high and rising because of high wages,” Junankar said.

“But as I argue in my forthcoming paper in Economic and Labour Relations Review, if we look at the evidence we see that youth unemployment rates have been rising even though youth wages have been falling relative to adult wages.

“Young people aged 15-19 have consistently had very high unemployment rates, compared to 20-24 year-olds, and compared to adults (25-64 year olds). The figure suggests that whatever is driving adult unemployment is also driving youth unemployment. The main factor driving the growth of adult unemployment (especially since the GFC) has been a slowdown in the growth of aggregate demand. This has led to a growth of both adult and youth unemployment.

“Youth unemployment is more sensitive to the business cycle since a high proportion of young people work in part time and casual work and in industries like manufacturing, construction, and retail trades that are most affected by a fall in aggregate demand.

“Almost a quarter of youth unemployed have been so for one year or longer. Considering they have only been in the labour force for a very short period that is a very high proportion.”

Junankar said it was a common misconception that an increasing minimum wage was a driving force behind unemployment.

“Another often quoted argument for the high and increasing youth unemployment rates is that overall minimum wages in the community are too high,” he said.

“But… real minimum wages have been almost constant for the past decade. Yet unemployment rates have been rising.

“The proposed policy of the Abbott government to restrict unemployment benefits to young people (under 30 years of age) for the first six months of unemployment would have serious consequences for the young. There is no evidence to support the view that youth unemployment is caused by high wages or by high unemployment benefits.”