Despite more than two years of higher interest rates, meant to slow down spending and activity in the economy, unemployment in Australia remains unusually low.

The nation’s chief number-crunchers, the Australian Bureau of Statistics (ABS), said there were 16,000 more people employed in October, while the number of unemployed climbed by 8000. The unemployment rate stayed at 4.1 per cent for the third month in a row – still very low by the standards of the past 50 years as well as earlier slowdowns.

You might think when employment rises, unemployment has to fall by the same amount – and vice versa. But here’s the thing: they can both rise or fall at the same time.

Low unemployment rate is one of the signs of an economy running hot.Credit: Matt Davidson

How is this possible? Because there’s a third factor: the proportion of people who choose to be in the labour force – either by having a job or actively looking for one. If someone is looking for work and doesn’t have any, it means they’re unemployed, but they’re still counted as part of the labour force.

Usually, more people start seeking a job if the economy and the jobs market are both thriving. Why? Because they believe there’s a better chance of finding a job. By the same logic, if the economy is slowing and the jobs market is worsening, people are less likely to even try searching for a job. The labour force can also grow if the population blossoms, but generally, the better the economy and jobs market, the more people will choose to “participate” in the labour force, helping to fatten it up.

So if the Reserve Bank has pumped the brakes on........

© The Age