- There are a greater proportion of Australians actively looking for work than ever before, according to the latest employment figures on Thursday.
- That’s despite a surprise 41,000 new jobs being created in July as the population continues to swell.
- The mixed result helped lift the Australian dollar rally higher against the US dollar, but will likely cement the need for the RBA to cut interest rates gain this year
The Australian economy just can’t catch a break at the moment, as the ever-important unemployment rate refuses to budge.
It remains firmly stuck at 5.2% despite the latest figures showing that 41,000 Aussies joining the workforce in July, and 330,000 over the past 12 months.
“Normally the employment growth we have experienced over the past two years would have led to a sizable decline in the unemployment rate. These are not normal times,” Callam Pickering, Australia-Pacific economist for job site Indeed, said in a note regarding the latest figures.
That’s because the proportion of people working and wanting to work — the participation rate — has never been so high.
— Evan Lucas (@EvanLucas_INV) August 15, 2019
“High population growth and rising participation has instead put upward pressure on measures of unemployment. Both the unemployment rate and underutilisation rate have drifted higher on a trend basis. That, in turn, suggests that stronger wage growth is unlikely in the foreseeable future,” Pickering said.
With the participation rate and the number of new jobs both rising, Pickering described the latest figures as a “fairly mixed bag”. With some expecting the unemployment rate to actually tick up to 5.3%, the surprise result helped lift the Australian dollar higher.
— CommSec (@CommSec) August 15, 2019
The result is sure to frustrate the Reserve Bank of Australia (RBA) which has made it clear that it wants to get unemployment down to 4.5% in order to get wages growing properly again. It anticipates that by getting more money in the pockets of Australians will inevitably lead to greater spending, helping get the economy back on track.
“At the very least, we can conclude that rising unemployment is a negative for wages and inflation and justifies the Reserve Bank’s decision to cut rates. As for their next move: markets have almost fully priced in a cut at the RBA’s October board meeting, with another cut likely by February,” Pickering said.
That could be exacerbated further with the economy unlikely to maintain the same rate of job creation, according to Pickering.
“Other measures of the labour market, such as job vacancies and advertisements, suggest that employment growth may slow over the next six months,” he said.
If so, Aussies may as well kiss any hope of a pay rise goodbye.