Pat McGrath reported this story on Thursday, June 12, 2014 18:22:00

MARK COLVIN: Australia's jobless rate has stabilised at 5.8 per cent, but economists have identified some worrying trends in the latest round of employment figures.



Youth unemployment has hit a 12-year high, and a growing number of people in part-time jobs say they're not working enough hours.



Meanwhile, overall workforce participation is continuing to decline as more baby boomers retire.



Business reporter Pat McGrath.



PAT MCGRATH: Twenty-two-thousand Australians found full-time jobs last month. Twenty-seven-thousand part-time workers lost theirs.



And so RBC Capital Markets economist Su-Lin Ong says the net loss of almost 5,000 was disappointing.



SU-LIN ONG: We view it, I guess, partly as a bit of payback for what's been a fairly strong few months in employment generation.



PAT MCGRATH: The unemployment rate has now been stuck at 5.8 per cent for three months, after hitting a decade high of 6 per cent earlier this year.



It avoided another rise in May because the participation rate edged down.



SU-LIN ONG: Which we never take as a particularly great sign. It looked like the participation rate was trying to bottom out, but it looks to have fallen a little bit more in the month of May.



PAT MCGRATH: In fact it's fallen to its lowest level since March 2006.



And Westpac economist Justin Smirk expects the number of people working or actively looking for work to continue falling.



JUSTIN SMIRK: We are scratching our heads a little bit, but it is quite interesting that this decline in participation is a little bit more structural and ongoing than we first thought.



PAT MCGRATH: But surely, having a bit part of the population, the baby boomers, retiring now, that would be contributing a fair portion of that decline, wouldn't it?



JUSTIN SMIRK: It is. If you just look purely at how the numbers are flowing through, you can quite quickly work out it's sort of explaining about 0.2 per cent of the fall per year, two percentage points.



But we've seen a much greater fall than that so there is other factors going on as well. It does appear that there's, under the weak labour market, the rate of people leaving the labour force for retirement is greater than just what the ageing is. You know, more people are choosing to leave.



But also, there is something quite not, not quite understanding that's going on as well, because what it's also highlighting is the employment to population ratio is in quite a steep decline as well.



That is, a share of the workforce, the population that's actually working and earning an income is declining and it's declining faster than we anticipated.



PAT MCGRATH: Today's released also provides a quarterly update on the portion of working Australians who say they're not getting enough hours. Combined with the unemployment rate, that means 13.5 per cent of the potential work force either aren't working, or aren't working enough hours.



JUSTIN SMIRK: So there does also appear to be a bit of a pause going on in the labour market. That is, employers are nervous to hire, they are underutilising people and rather than going through a large firing rate, are just working the labour markets a bit softer.



So it all goes to the vein of that, why we're seeing households being a little bit conservative about their spending patterns, a little bit conservative about how they anticipate these things, and it's really highlighting that, you know, yes, we don't have a rapidly rising unemployment rate, but underlying that, the labour market is perhaps not as strong as what that not-rising unemployment rate suggests.



PAT MCGRATH: There is one jobless figure that is rising - the youth unemployment rate. For people aged 15 to 24 it's hit a 12 year high of 13.1 per cent.



Lucas Walsh from Monash University researches the impact of higher unemployment on young people and he's not surprised by today's figures.



LUCAS WALSH: Young people are particularly vulnerable to changes within economic cycles and we saw this with the global financial crisis, which hit young people immediately and disproportionately.



Similarly, we can in fact see young people carrying the burden of instability at the moment. We've seen young people hit hard by changes in the economy.



The retail and services sectors are large employers of young people, and with downturns experienced of late, it's not surprising to see more young people unemployed.



MARK COLVIN: Lucas Walsh from Monash University ending that report from our business reporter Pat McGrath.