Australia’s jobs report for June is about to be released.
While the labour force survey has always been one of Australia’s most important data releases, its influence has perhaps grown this year given the Reserve Bank of Australia (RBA) is relying upon it to achieve many of its policy objectives.
For one, it’s banking on strong hiring levels to help lower unemployment, boost wage pressures and bolster economic growth though a pickup in household spending. If all goes to plan, that should help to lift inflationary pressures, eventually allowing the bank to begin normalising interest rates.
Secondly, despite a slowdown in household credit growth in recent years, it’s still growing faster than incomes, increasing household leverage. At 190%, Australia’s household debt to disposable income ratio is the highest its ever been, meaning stronger labour market conditions will be required to bolster income levels, helping to level out, and eventually reduce, this ratio.
Be it for growth and inflation targets, or financial stability risks, the labour market is key, meaning all jobs reports have now taken on an extra degree of importance.
Today will be no exception.
Here’s the state of play.
- In May, Australia’s unemployment rate tumbled to a six-month low of 5.4%, largely reflecting a decline in labour force participation rather than a solid pickup in hiring.
- Employment rose by 12,000, missing forecasts for an increase of 19,000. April’s jobs increase — originally reported as a gain of 22,600 — was revised down to 18,400.
- Full-time employment decreased by 20,600, offset by a sharp lift in part-time employment of 32,600.
- Reflecting those trends, total hours worked fell by 24.2 million hours, or 1.4%, to 1.7388 billion hours, reversing gains achieved in April.
- Over the year, full-time employment increased by 178,800, slightly faster than the 125,100 lift in part-time employment. Combined, total employment increased by 303,900, continuing to slow from the levels seen last year.
- Despite the undershoot on employment in May, and helping to explain why unemployment fell, labour force participation slipped from 65.7% to 65.5%, reflecting a 14,800 decline in the size of Australia’s labour force.
- Along with the small increase in employment, that saw the number of unemployed workers fall by 26,800.
- Despite the reduction in unemployment, the quarterly underemployment rate — measuring those workers with a job but who would like to work more hours — increased by 0.1 percentage points to 8.5%.
- That left quarterly labour market utilisation — the broadest measure of slack in the labour market capturing both unemployed and undermployed workers — steady at 13.9%.
- For wage growth to increase in a meaningful manner, this excess amount of underutilised workers needs to fall.
- Today, economists expect another solid increase in employment, leaving the unemployment rate steady at 5.4% given an expectation that labour force participation will remain at 65.5%.
- Of the 22 polled by Bloomberg, the median forecast looks for an increase of 16,500. Individual forecasts range from a gain of anywhere between 5,000 to 30,000.
- With no underemployment or underutilisation figures contained in today’s report, markets will look to the unemployment rate to gauge whether any further progress has been made on reducing the number of underutilised workers. The split between full and part-time employment, as well as total hours worked, will also be watched closely.
- Of note, the split between full and part-time employment growth has reversed the prior months moves in recent reports. If that pattern is maintained, it hints that full-time hiring may increase while part-time employment may decline.
- Leading indicators on employment have been mixed of late. While job vacancies, helped by a surge in openings at labour hire firms, sit at record highs, growth in job ads has slowed noticeably.
- At its July monetary policy meeting, the RBA described the outlook for the labour market as “positive”. “The vacancy rate is high and other forward-looking indicators continue to point to solid growth in employment. A gradual decline in the unemployment rate is expected, after being steady at around 5.5% for much of the past year,” it said.
The jobs report will be released at 11.30am AEST.
Business Insider will have all of the facts and figures, along with the implications, as soon as it hits the screens.
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