Australia just set a new record for job creation

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Australia has now created jobs in each of the past 16 months, the longest stretch ever seen before.

According to the Australian Bureau of Statistics (ABS), employment grew by 16,000 in seasonally adjusted terms in January, marginally topping forecasts for an increase of 15,000.

Part time employment surged by 65,900, masking an ugly 49,800 decline in full time workers.

That reversed the trend seen over the year where full time employment soared by 293,200, far outpacing a 110,100 increase in part time employment over the same period.

At 12.4535 million, total employment now stands at the highest level on record, helped by a record stretch of consecutive monthly gains that began way back in October 2016.

The ABS said employment grew by 19,700 in Queensland, outpacing gains of 5,300 and 2,100 in South Australia and Victoria. At the other end of the spectrum, employment fell heavily in New South Wales and Western Australia with declines of 21,200 and 8,900 respectively.

Reflecting the drop in full time employment over January, total hours worked fell heavily in seasonally adjusted terms, declining by 24.1 million hours, or 1.4%, to 1.7082 billion hours. It followed a decline of 8.6 million hours in December.

With labour force participation falling 0.1 percentage points to 65.6%, the modest increase in employment saw Australia’s unemployment rate fall to 5.5%.

That was in line with market expectations, and below the upwardly-revised 5.6% level of December.

Labour force participation measures the percentage of Australia’s working age population who are either in or actively seeking work.

Australia’s employment to population ratio — measuring those Australians of working age in work — held steady for a second month at 62.0%.

Reflecting that employment increased faster than the size of Australia’s labour market over the month, unemployment fell by 7,900 to 723,800 in seasonally adjusted terms.

By state and territory, unemployment increased in New South Wales, Queensland and South Australia, and held steady in Western Australia, offset by huge declines in Victoria and Tasmania.

Source: ABS

Like the split between full and part time employment, the size of the monthly movements in the state unemployment figures likely reflects noise in the seasonally adjusted figures, rather than actual changes in unemployment.

So, in a nutshell, the report was OK without being great.

Yes, employment increased, but there’s likely to be some disappointment around the composition given it was entirely driven by part time jobs. The decline in hours worked was also notable, continuing to reverse the strength seen in 2017.

Perhaps of more importance, while the unemployment rate did improve, it still sits well above the level that usually heralds an acceleration in wage pressures.

Combined, it offers few signals that labour market is getting so tight that wage pressures are building.

“High underemployment means that the unemployment rate will have to fall well below 5.0% before the labour market generates much wage and price inflation,” said Paul Dales, Chief Australia and New Zealand Economist at Capital Economics.

“So while the continued strength of the labour market will support consumption growth this year, without much more wage inflation the RBA isn’t going to raise interest rates.”

Callam Pickering, APAC economist for global job site Indeed, agrees that today’s report provides no near-term reason for the RBA to touch interest rates.

“Labour market slack remains elevated, which helps to explain the ongoing weakness in wage growth and the cautiousness of Australian households,” he says.

“We believe that there is reason to be optimistic on wages, particularly now that businesses are cashed up with some reporting a greater difficulty in finding new staff, but improvement could be slow.

“With wage growth and inflation so low, tighter monetary policy will not come into the RBA’s near-term calculations.”

NOW READ: One simple chart explains why the RBA isn’t hiking interest rates like other central banks

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