I received an email from Joo Lim who wrote:
Today’s Australian employment change reported that 14.5K jobs were added, yet the unemployment rate went up to 5.4% from the previous month at 5.3%. This seems contradictory to me. Can you help me make some sense of this?
Employment Change is measured by the ‘change in the number of employed people’.
Unemployment Rate is measured by the ‘percentage of the total work force that is unemployed and actively seeking employment’.
It is possible for Employment Change to be positive (more people employed compared to the previous period) while the Unemployment Rate is higher (higher percentage of the population without jobs). This is because there are people entering and leaving the workforce at any given time. If there are people entering the workforce, but have yet to be gainfully employed, the unemployment rate can increase because the measurement is based on a bigger pool of people.
Using the latest Australian Employment Change and Unemployment Rate as an example, more people were employed (an additional 14.5K) in September, compared to August, but the unemployment rate increased from 5.1% (previous) to 5.4% (actual). A possible explanation for this is the increase in the number of people entering the workforce during September.
Note that these figures were obtained through surveys conducted on a sample number of corporations and then extrapolated to reflect the employment market. Keep this in mind when you look at the next economic news release.
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