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Unemployment steady; more jobs; but working h -

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ELEANOR HALL: The jobs market in Australia continues to defy expectations. According to official
estimates the unemployment rate stayed steady in July at 5.8 per cent, surprising economists and
financial markets.

The economy added more than 32,000 jobs though all of them were part-time.

Joining me in the studio is our economics correspondent Stephen Long.

So Stephen, take us through these numbers. They look a lot more optimistic than the Federal
Government has been predicting?

STEPHEN LONG: Indeed Eleanor. The collapse in employment and the rising tide of unemployment that
has been expected by so many for so long refuses to come. Instead what we're seeing is a continuing
fall in full-time employment and a rise in part-time employment.

So there were 16,000 full-time jobs shed in the month on the official estimate and an increase of
48,200 in the number of part-time employees. And so if you net that out you've got an increase of
just over 32,000 jobs but what you're seeing is full-time jobs being shed and part-time employment
rising.

And when you round it out again you have no increase overall seasonally adjusted in the
unemployment rate which has stayed steady at 5.8 per cent.

Now the median forecast, the midpoint by the market economists who get paid to pick this was 6 per
cent so you had half expecting it would be 6 per cent or more and so this has defied expectations.

It's basically very optimistic compared to the Treasury predictions that we had in the Budget and
if the trends continue this way we're unlikely to see the 8.5 per cent peak in unemployment that
was predicted by Treasury.

ELEANOR HALL: So how do you interpret this? I mean should people who are in jobs now be just
feeling a lot more confident or is there more to these numbers?

STEPHEN LONG: The significant thing that you're seeing and what really tells the story is not the
headline unemployment rate. It's what's happening with working hours.

And quite usefully the Australian Bureau of Statistics has published material on working hours with
the labour force figures out today and what they show is that there were 1.5 million work hours
shed - 1.5 million fewer work hours in July this year compared to June.

And in the past year in the year to July there were more than 35 million fewer work hours in the
economy.

So what you're seeing is a steady erosion of work hours far more pronounced than the decline in
joblessness.

So that confirms what many had suspected, that one of two things is happening, probably both:
Employers are hording labour, they're keeping people on but cutting their work hours; and there's
been a sectoral shift. So you're getting a decline in industries where you have people
predominately employed full-time and maybe an increase in industries where people are predominately
employed part-time.

And you see that with who's getting hit in terms of men and women. So in this month, male
unemployment went up by 0.1 of a per cent. Female unemployment fell by 0.1 of a per cent.

Now that dovetails with what we know about the industry breakdown with manufacturing, construction,
the male dominated industries shedding jobs and shedding full-time jobs and female dominated
industries rising with the fiscal stimulus boosting service sector jobs.

ELEANOR HALL: This is clearly quite complex. How will it fit into the optimism that we've been
seeing from the Reserve Bank about the economy and what's it likely to mean for interest rates?

STEPHEN LONG: I think the only way to interpret it is that the Reserve Bank will see this as
positive news and it lends weight to those who think that the next move in interest rates will be
up although we can't say with any certainty when that will be.

And the market reaction confirms that Eleanor because you saw the Australian dollar jump after this
came out because basically the Reserve Bank tends to look at what's happening with the headline
unemployment rate and so do the financial markets and this will confirm their sort of fairly rosy
view.

And let's put it in context. Compared to what's happening overseas it is good news. It's preferable
to have it playing out as an underemployment crisis with diminishing work hours than having it
playing out as an unemployment crisis.

So you've got unemployment close to 10 per cent in America and parts of Europe and more in some
parts of Europe and you've only got it at less than 6 per cent here. If this continues in this vein
then it's a fairly reasonable outcome.

ELEANOR HALL: Stephen Long our economics correspondent. Thank you. And we will have reaction from
the Government to these numbers later in the program.