- Australian employment surged in January with all of the jobs created full-time positions.
- Despite strong hiring, the unemployment rate held steady at a seven-year low of 5%. Unemployment in New South Wales tumbled to 3.9%.
- Improving job market conditions encouraged more Australians to look for work, explaining why the national unemployment rate didn’t fall.
- Broader measures of labour market underutilisation fell, although not by enough to improve the prospects for faster wage growth in the near-term.
- The RBA said earlier this month that a sustained lift in unemployment could lead it to cut rates again. Economists say today’s result lessens the chance of a near-term rate cut being delivered.
Australian employment surged again in January despite a large increase in the size of the labour force, leaving the unemployment rate steady at 5%.
According to the Australian Bureau of Statistics (ABS), employment by jumped by 39,100 after seasonal adjustments, breezing past forecasts for a smaller increase of 15,000.
December’s employment increase, originally reported as 21,600, was revised down slightly to show a smaller gain of 16,900.
Making the headline lift in employment all the more impressive last month, all of the jobs created were full-time positions, reversing the trend seen in the prior two months.
It increased by a mammoth 65,400 from December, masking a 26,300 fall in part-time employment.
Over the year, full-time employment rose by 236,100, significantly faster than the 35,200 increase in part-time jobs. A total of 271,300 jobs have been created since January 2018, representing an increase of 2.2%, unchanged from the pace seen in the year to December.
As you would expect given the monthly split in hiring, that saw total hours worked lift by 6.6 million hours to 1.7664 billion hours.
By state, almost all of the jobs created in January came from just one state: New South Wales, the most populous state in Australia.
Employment there rose by an impressive 47,200, significantly faster than second-placed Victoria at 2,200. Partially offsetting those gains, employment slumped by 19,900 in Queensland and by 4,500 in South Australia.
Despite the surge in hiring last month, the unemployment rate held steady at a seven-year low of 5%, as expected.
The steady reading reflected that the labour force participation rate — measuring the proportion of working-age Australians either with a job or actively seeking work — rose by 0.1 percentage points to 65.7%.
In numeric terms, the size of Australia’s labour force rose by 45,700 last month, faster than the 39,100 increase in employment. That saw the total number of unemployed workers increase by 6,600 to 673,500 in January.
By state, unemployment in New South Wales tumbled to 3.9%, down sharply from 4.3% in December. In contrast, unemployment spiked in Victoria to 4.5%, up from 4.2% a month earlier.
Unemployment in Queensland also fell to 6%, masking significant increases in all other state during the month. The ABS does not release seasonally adjusted unemployment figures for Australia’s territories.
With job growth continuing to rollick along, the employment to population ratio — measuring the proportion of Australia’s working-age population with a job — increased by 0.1 percentage points to 62.4%, leaving it up 0.3 percentage points over the past year.
It currently sits at highs not seen since January 2011.
Like the unemployment rate, other measures of labour market underutilisdation also fell last month.
The underemployment rate dipped 0.2 percentage points to 8.1%, leaving it at the lowest level since June 2014. This measures the number of Australians with a job but who would like to work more hours.
Combined with unemployed workers, the labour force undertilisation rate also fell to 13.2%, down from 13.3% in December.
The underutilisation has a far stronger inverse relationship to wage growth than the unemployment rate. Despite falling to the lowest level since September 2013 last month, it still remains elevated compared to levels in the past, pointing to a continuation of sluggish wage pressures ahead.
At least there’s signs of progress.
“The underutilisation rate is still much too high, contributing to the soft wage growth that was released on Wednesday,” said Callam Pickering, APAC Economist for global job site Indeed.
“We are unlikely to see wage growth of 3% or higher until the underutilisation rate pushes below 12%.
“That could take at least another couple of years, notwithstanding a potential slowdown as house prices continue to soften and business conditions moderate.”
However, while wage pressures look set to remain subdued for some time yet, there’s was few things to dislike about the January report. Employment grew strongly, led by full-time workers, while stronger job market conditions encouraged more Australians to join the workforce.
And while it would have been nice to see unemployment fall, given there was a risk of an increase in January due to the effects of the ABS survey rotation, the steady outcome suggests there’s still little need for the RBA to cut interest rates in the near-term.
“The Reserve Bank isn’t going to cut if this momentum in the labour market persists,” Pickering said.
“Labour market measures may lag economic activity but there will naturally be some reluctance to cut while trend employment growth is so strong. They may also be hoping that a solid labour market acts as a barrier against falling house prices, helping to limit the damage.
“Either way, I wouldn’t expect the Reserve Bank to act until there is evidence that employment growth is slowing.”
Marcel Thieliant, Senior Economist at Capital Economics — a group who is forecasting rate cuts — agrees that today’s report suggests further monetary policy stimulus is not necessary at this point.
“The Reserve Bank of Australia’s forecast is that the unemployment rate will end the year at 5%, so the January figures won’t change the Bank’s outlook in a meaningful way,” he said.
However, Thieliant isn’t ready to change his view on rate cuts just yet.
“We think that the downturn in the housing market will result in much weaker GDP growth than the Bank is anticipating, which means that the labour market should start to slacken again before long,” he said.
“We expect the unemployment rate to climb to 5.3% this year, which suggests that wage growth won’t accelerate any further from the 2.3% annual increase in Q4.”
Earlier this month, the RBA said that a sustained increase in Australia’s unemployment rate is one outcome that could see it consider cutting the cash rate again.
That’s clearly not happening at this point.