- Australian employment growth surged in October, keeping the unemployment rate steady at a six-year low despite an increase in labour market participation.
- Full-time employment jumped by 42,300, adding to the gains seen in September.
- Australia’s underemployment and undertutilisation rates held steady, and remain at elevated levels. This points to a continuation of soft wage pressures in the period ahead.
- The RBA is unlikely to lift official interest rates until strong labour market conditions begin to meaningfully feed through to wage pressures.
Australian employment growth surged in October, keeping the unemployment rate steady despite an increase in labour market participation.
According to the Australian Bureau of Statistics (ABS), employment jumped by 32,800 in seasonally adjusted terms, breezing past market expectations for a smaller increase of 20,000.
The increase saw Australia’s employment to population ratio — measuring the proportion of working-age Australians with a job — lift by 0.1 percentage points to 62.3%, leaving it up 0.5 percentage points from the same time last year.
The ratio now sits at the highest level since March 2011.
September’s jobs increase, originally reported at 5,600, was also revised up to show a gain of 7,800.
Making the headline increase all the more spectacular, it was entirely driven by full-time employment which rose by 42,300, more than offsetting a 9,500 decline in part-time workers.
Over the past year, full-time employment has risen by 238,800, outpacing an increase in part-time employment of 69,400.
Mirroring the strong lift in employment growth in October, the ABS said total hours rose by 6.1 million hours, or 0.3%, to 1.7644 billion hours.
By location, employment rose by 16,300 and 7,700 respectively in New South Wales and South Australia, helping to offset modest falls of 3,500 and 3,200 respectively in Victoria and Queensland.
Despite the large increase in employment nationally last month, the unemployment rate held steady at 5.0%, leaving it at the lowest level in over six years. However, the result was still better than the 5.1% rate that had been expected by economists.
By state, unemployment was flat to lower in all locations apart from Queensland.
In numeric terms, the ABS said total unemployment rose 4,600 to 672,100, driven by a slightly larger increase in the number of working-age Australians actively looking for work.
The labour force participation rate — measuring the proportion of working-age Australians in employment or actively seeking work — increased to 65.6%, up from 65.5% in September.
The size of Australia’s labour force increased by 37,400 over the month — faster than the gain in employment — explaining the modest lift in unemployment.
While unemployment rising is never a good thing, the reasons behind the increase was simply more Australians want to work.
Like the unemployment rate, Australia’s underemployment and underutilisation rate also held steady at 8.3% and 13.3% respectively from a month earlier.
The underemployment rate measures the proportion of the labour force with a job but who would like to work more hours. The underutilisation rate includes both underemployed and unemployed Australians, providing the broadest measure of slack that exists within the labour market.
The latter is far more influential on wage pressures in the post-GFC era, and indicates that there’s still a large degree of underutilised workers despite the ongoing improvement in the labour market.
The steady reading in October hints that persistent weakness in wage growth is likely to persist for the foreseeable future.
However, while the outlook for wages remains subdued, Callam Pickering, Asia Pacific economist for labour market specialists Indeed, said the details of the October report were strong.
“Full-time roles have accounted for 83% of employment growth throughout 2018, after accounting for three-quarters of growth last year,” he said. “Australia is creating high-quality roles and that, more than anything, is eating into labour market slack across the country.”
And Pickering says that will please policymakers at the Reserve Bank of Australia (RBA).
“The Reserve Bank would be very happy with today’s report,” he says.
“It consolidated the gains from last month and strong growth in full-time roles points to a thriving jobs market. Much progress still needs to be made, which suggests that a rate hike in the near-term is unlikely, but it is still a step in the right direction.”
As for when the RBA will deem it time to lift official interest rates, Pickering says it will be when strong labour market outcomes begin to feed into wage pressures.
“Wage growth, rather than employment, is the more pressing issue for the RBA and we don’t expect an interest rate hike until wage growth improves significantly,” he says.
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