Australia's run of job creation is still looking solid

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Australia’s employment growth slowed sharply in October, recording the weakest increase since late 2016.

According to the Australian Bureau of Statistics (ABS), employment grew by 3,700 in seasonally adjusted terms, missing expectations for an increase of 18,000.

Full-time employment increased by 24,300, offsetting a 20,700 decrease in part-time employment.

Paul Dales, Chief Australia and New Zealand Economist at Capital Economics, said that a number of factors likely contributed to the slowdown in employment growth.

“With up to 4,000 jobs reportedly lost due to the closures of the Toyota and Holden car factories in October, we always thought that employment would rise more modestly than in recent months,” he said following the release of the report.

“But there seems to have been a more widespread softening too.

“Employment appears to have fallen in all states except Queensland and the ACT. This is probably just payback from the incredibly strong run in recent months rather than anything to worry about too much.”

Indeed, partially mitigating October’s miss, September’s employment increase — originally reported at 19,800 — was revised higher to 26,600.

Over the year, full-time employment increased by 297,900, overshadowing a 57,800 gain in part-time workers. Combined, employment increased by 355,700, or 3%.

Total employment now stands at 12.2971 million, the highest level on record. It has also increased in each of the past 13 months, the longest stretch of consecutive gains since July 1994.

Like the headline increase in jobs, total hours worked also ticked higher, rising by 4.6 million hours, or 0.3%, to 1.77237 billion hours.

The unemployment rate fell to 5.4%, below the 5.5% level expected, thanks to a drop in the labour market participation rate which fell from 65.2% to 65.1%.

The national unemployment rate now sits at its lowest level since January 2013.

The male unemployment rate skidded to 5.2%, the lowest level in over five years. For females, it rose 0.1 percentage point to 5.6%.

Helping to explain that divergence, the labour force participation rate for men dropped to 70.5%, the lowest level in four months. Put another way, less men of working age were either in employment or looking for work last month, helping to lower the unemployment rate.

The female participation rate, in comparison, held steady at 59.9%, leaving it at the equal highest level on record.

The number of unemployed Australians fell to 701,500, a decrease of 8,100 on a month earlier. That’s the lowest level since September 2013.

Male unemployment fell to 362,400, a near five-year low. Female unemployment went the other direction, rising to 339,100.

This table from the ABS shows the change in unemployment rate by state and territory.

Source: ABS

Despite the headline miss on employment growth and small decline in labour force participation which contributed to the unemployment rate falling further, the October report was largely good news.

Employment continued to grow, once again led by full-time employment, with hours worked also pushing higher. And while unemployment largely fell on the back of less Australians participating in the labour market, that only partially reversed a strong upward seen over the past year.

Plus the total number of Australians unemployed is now at the lowest in years.

“There is a lot of good news in this release,” said Callam Pickering, economist at Indeed.

“The unemployment rate dipped to 5.4% and the number of unemployment people fell to its lowest level in four years. Full-time employment continues to make strong gains — having accounted for almost 85% of employment growth over the past year — and hours worked across the economy is rising at its fastest pace in almost seven years.”

That all points to tightening labour market conditions, something that would normally bode well for wage growth in the period ahead.

However, as Pickering explains, and as seen in Australia’s wage price index released earlier this week, just because labour market conditions are strengthening, it does not automatically imply that wage pressures will follow suit.

“There remains a high degree of slack across the labour market, despite recent improvements,” he says.

“This helps to explain the ongoing weakness in wage growth and the cautiousness of Australian households.

“Together the data indicates that the economy still has a long way to go before the Reserve Bank will consider tighter monetary policy.”

There has been little market reaction to the jobs report, fitting with the mixed detail it contained.

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