- Australian employment grew for a 17th consecutive month in February, extending the record set one month earlier.
- Despite solid employment growth, the unemployment rate rose to 5.6% thanks to more Australians actively seeking work.
- Labour market underemployment and underutilisation — broader measures of excess capacity within the labour market — both rose in the quarter, an outcome that does not bode well for an increase in wage pressures anytime soon.
Australia logged another solid increase in employment in February, extending its record-breaking run of consecutive jobs growth into a 17th consecutive month.
However, while jobs growth remains consistent and strong, unemployment and underemployment rose, two outcomes that don’t bode well for wage growth.
According to the Australian Bureau of Statistics (ABS), employment rose by 17,500 by in seasonally adjusted terms during the month, undershooting forecasts for an increase of 20,000.
At 12.48 million, employment currently sits at the highest level on record.
While the headline employment figure missed fractionally, the composition of the increase was strong.
The ABS said full-time employment surged by 64,900 to 8.534 million, offsetting a 47,400 decrease in part-time workers which fell to 3.947 million.
The composition between full and part-time hiring was exactly the opposite to that seen in January.
January’s jobs figure, originally reported as a gain of 16,000, was revised down to an increase of 12,500.
Over the year, full-time employment jumped by 327,600, outpacing a smaller increase of 93,100 in part-time workers. Combined, total employment rose by 420,700, the second-highest level over a 12-month period on record.
Over the same period, the size of Australia’s labour force — combining workers and those seeking work — grew by 406,700, reflecting that stronger labour market conditions encouraged Australians to enter or rejoin the workforce.
Population increase also added to the labour force with Australia’s civilian population aged 15 years and older lifting by 328,500 over the year in original terms.
Australia’s employment-to-population ratio — measuring the percentage of working age Australians in employment — held steady at 62% for a second consecutive month. It has risen by close to 1.5 percentage points since late 2014 and sits at the highest level in around seven years.
Across the states and territories, the largest increase in employment was in New South Wales at 28,400, followed by South Australia at 7,500. Those gains were partially offset by a decrease of 11,300 in Victoria.
Reflecting the increase in full-time hiring seen during the month, the ABS said the total amount of hours worked jumped by 21.2 million hours, largely reversing the declines reported in the prior two months.
The unemployment rate rose to 5.6%, above the 5.5% level expected, due to an uptick in the labour force participation rate to 65.7%.
Many believe the unemployment rate will need to fall to 5% or lower before wage pressures in Australia will start to accelerate.
Across the country, unemployment rose in all states aside from New South Wales where it tumbled 0.3 percentage points to 4.8%.
With the size of the labour force increasing faster than the lift in employment, the total number of unemployed Australians rose by 8,900 to 734,100.
Doubling down on the bad news for wage growth, the quarterly underemployment rate, predominantly measuring the proportion of workers who have a job but who would like to work more hours, rose by 0.1 percentage points to 8.4%.
Combined with unemployed workers, that saw the labour market underutilisation rate lift 0.1 percentage points to 13.9%.
This figure is regarded as being a better measure on the level of slack that exists within the Australian labour market. It essentially means that despite the surge in hiring seen recently, the level of underutilised workers in the labour market increased over the past three months.
“It is disappointing that the overall amount of spare capacity is not declining,” said Paul Dales, Chief Australia and New Zealand Economist at Capital Economics.
“As such, these data go some way to dashing any remaining expectations that a decent rise in wage growth will prompt the RBA to raise interest rates this year.”
Callam Pickering, APAC Economist at employment specialists Indeed, agrees, noting that while the details of the February report would likely please the RBA, the high number of underutilised workers in Australia means there’s very little need for the bank to lift interest rates in the months ahead.
“With wage growth and inflation so low, along with plenty of labour market slack, we don’t think tighter monetary policy will come into the RBA’s near-term calculations,” he says.
“We still believe that a rate hike won’t occur until 2019.”