Unemployment rate falls (but not in a good way)

The ABS released the August 2012 labour force data ... it was a surprising fall from 5.2 per cent to 5.1 per cent nationally (seasonally adjusted). Markets had been expecting an increase. However, scratch below the headline and all is not well in the worker's paradise. In large measure, today's result is an artifact of unemployed people giving up and withdrawing from the labour market.

The headline result was NSW driven ...

As I indicated above, the headline good news was driven by a reduction in the participation rate; now lower than during the GFC.

The participation rate changes appear to be more evident in the male population. Similarly trend male unemployment is growing while female unemployment is falling.

The number of people in jobs fell. The number of people unemployed fell further. The labour force shrunk. Where did those unemployed people go?

Worryingly, the number of hours worked each month appears to be plateauing. This is not the signs of a growing economy that a headline fall in the unemployment rate should indicate.

Indeed, the next graph suggests we are heading into a downturn.