Australia's jobless rate lifts unexpectedly -- but the news isn't all bad

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  • Australia’s unemployment rate rose to 5.1% in November as the labour force grew faster than employment.
  • Employment jumped by 37,000, nearly double the level expected, although all the jobs were part-time positions.
  • Both labour force participation and the employment to population ratio increased , indicating that solid labour market conditions are encourage people to work or look for work.
  • Underemployment and underutilisation rose, a disappointing result that points to continued softness in wage pressures.

  • Australia’s unemployment rate rose unexpectedly in November as the labour force grew faster than employment.

    According to the Australian Bureau of Statistics (ABS), employment jumped by 37,000 in seasonally adjusted terms, easily beating expectations for an increase of 20,000. That followed a 28,650 increase in October, below the 32,800 level originally reported.

    Total employment now stands at 12.694 million, the highest level on record.

    All of the hiring spree last month came from part-time employment which increased by 43,400, more than offsetting a decline of 6,400 in full-time workers.

    Over the past year, full-time employment still rose faster than part-time employment, lifting by 180,200 and 105,500 respectively. In percentage terms, employment growth over the year slowed to 2.3% from 2.5% in October, well below the 3.5% levels seen in early 2018.

    By state, employment jumped by 30,900 in Victoria and 21,800 in Queensland, masking a 12,600 decline in New South Wales.

    The Victorian state election was held during the month, potentially explaining the large rise in employment in the state. 29,362 of the 30,900 jobs created during the month were part-time positions.

    While plenty of jobs were created last month, total hours worked fell, dropping by 3.3 million hours to 1.7595 billion hours.

    Despite the sharp lift in employment, the unemployment rate rose to 5.1%, above the 5.0% level expected.

    That was due to another lift in labour force participation which rose to 65.7% from 65.5% in October.

    The increase in the number of people participating in the workforce is a good thing, albeit on this occasion it led to a small increase in the total number of unemployed workers which rose by 12,500 to 683,100.

    While employment increased by 37,000, the number of people either in employment or actively seeking work rose by a larger 49,500, explaining the increase in unemployment.

    Male unemployment accounted for a bulk of the increase, lifting by 11,500 from a month earlier. Female unemployment rose by a smaller 1,000.

    While unemployment rose, the employment to population ratio increased by 0.1 percentage points to 62.3%, leaving it up 0.4 percentage points from 12 months earlier. This measures the proportion of Australia’s civilian working age population in employment.

    Like the lift in participation, this too is a good result.

    By state, unemployment rose in Victoria, Queensland, Western Australia and Tasmania. Despite employment declining over the month, the New South Wales unemployment rate fell to 4.4%, not only the lowest level in the country but a fresh decade-low. The decline was due to labour force participation falling significantly from a month earlier.

    South Australia’s unemployment rate also fell by 0.1 percentage points to 5.3%. The ABS does not release seasonally adjusted figures for the territories.

    ABS

    However, fitting with the mixed nature of the November report, there was disappointing news on the outlook for wage growth — both the underemployment and uderutilisation rates rose after seasonal adjustments.

    The underemployment rate — measuring those with a job but who would like to work more — rose by 0.2% to 8.5%. Combined with the increase in unemployment, that saw the underutilisation ratio lift to 13.6%, up 0.3 percentage points from a month earlier.

    The underutilisation rate is the broadest measure of slack that exists within Australia’s labour market. It also has a far stronger inverse relationship to Australian wage pressures than the unemployment rate in the post-GFC era.

    Put bluntly, when it rises, wage growth tends to slow — not an ideal scenario for households, nor the RBA who are banking on faster wage growth in the coming years to help sustain spending levels and boost inflationary pressures.

    “Unfortunately this suggests that sluggish wage growth will again be a feature of the economy in 2019,” said Callam Pickering, APAC Economist at Job Specialists Indeed.

    “Downgrades to the wage forecast by the RBA and Treasury are all but certain.”

    Capital Economics Senior Economist Marcel Thieliant expressed a similar opinion, suggesting “a rapid pick-up in wage growth is not on the cards”.

    “The RBA expects the unemployment rate to remain around 5% over the coming year and it won’t be too worried by the latest increase. And given the solid rise in employment in November, we suspect that markets won’t price in further monetary policy easing as a result of today’s data,” he said.

    “But with labour market slack diminishing only slowly, a rapid pick-up in wage growth is not on the cards.”

    Looking ahead, Pickering says the risks for labour market conditions appear to be slanted to the downside.

    “Cracks are beginning to show, particularly surrounding the property market, and that might spill over to employment next year,” he said.

    “Several industries, including construction, finance and retail, may come under pressure as prices fall and wealth is destroyed.”

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