Unemployment rate *FALLS* from 5.3% to 5.2% (same as where it was in January 2010)

The key variable in the ABS labour force survey that the RBA and sophisticated analysts focus on is the unemployment rate, since the absolute employment numbers are too volatile to make much sense of. It is, for example, the unemployment rate that the RBA uses when forecasting inflation. The good news is that the unemployment rate actually fell in December from 5.3% to 5.2% (the previous November estimate was 5.3% and has revised down to 5.2%) with the number of hours worked also increasing. As you can see from the chart below, the unemployment rate has basically flat-lined since January 2010 at around 5%. Other more comprehensive labour data, such as the number of people on the dole, and the number of people looking for a job on the dole, imply that the labour market is tighter than what the unemployment rate suggests...Some commentators trying to defend their uber bearish forecasts for the Aussie economy, and hoping that the RBA will slash rates 4-5 times, will make a big deal of the monthly decline in total employment. But as I noted above, these inputs are so volatile, and based on such a small sample, they have limited predictive capacity. The best proxy for the overall labour market in this survey is the actual unemployment rate.