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Lower jobless rate masks worrying trends

AAP logoAAP 15/09/2016 Marty Silk

The unemployment rate has fallen to a three year low despite a fall in the number of jobs in August, and a rise in the number of people looking for more work.

The jobless rate dropped to 5.6 per cent in August, from 5.7 per cent in July, even as the total number of people with jobs fell 3,900.

Capital Economics chief economist Paul Dales said a fall in the participation rate - the number of people employed or actively looking for work - indicates unemployment fell because there were fewer people looking for a job.

Another worrying factor is underemployment, Mr Dale said, with a rise in the number of people who are employed, but want more work.

"That suggests there is still plenty of spare capacity in the labour market, which will keep wage growth close to current record lows for some time yet," he said.

Falling unemployment is usually accompanied by wages growth, as it typically signals workers are in demand and employers are increasing pay to hold onto their staff.

CommSec chief economist Craig James said the latest numbers didn't warrant too much analysis, as it reflects the aftermath of the federal election and the UK's vote to exit the European Union.

"Simply, businesses wanted to see what happened before undertaking additional spending, investment or employment," he said.

"We expect that economic momentum will recover in the next few months."

Royal Bank of Canada analyst Michael Turner noted the labour force survey was taken during the census, when the Australian Bureau of Statistics hired about 38,000 people.

Most of those workers were already employed, so it had a minimal impact on overall employment, but it may have impacted the breakdown of full-time and part-time jobs, he said.

Full time employment positions rose by 11,500 in August, while part-time roles fell by 15,400.

Part-time employment has been on the rise in recent jobs surveys, while full-time jobs growth has stagnated in the past year.

"The split between full-time and part-time ... should not be taken as a sign of trend reversal away from (growing) part-time employment," Mr Turner said.

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