- Australian employment growth has slowed noticeably in recent months, contributing to an increase in unemployment.
- Australian job advertisements surged in May, according to data from ANZ Bank, pointing to a possible re-acceleration in employment growth in the months ahead.
- Other lead indicators on hiring are also strengthening at present.
After an enormous increase in 2017, Australian employment growth has slowed noticeably in recent months.
According to data from the Australian Bureau of Statistics (ABS), just 52,900 jobs have been created so far this year, equating to an average increase of 13,200 per month, well below the 34,600 average sein 2017.
The slowdown, accompanied by a strong increase in the number of Australians entering the labour force, has seen Australia’s unemployment rate lift to 5.6% in April, up from 5.4% late last year.
Lead indicators such as job vacancies have also weakened recently, recording the first decline in 17 months in April, according to official government data.
At the time of that release, we said it could signal that employment growth may slow further in the second half of the year.
However, based on data released today, perhaps we spoke too soon.
According to ANZ Bank, Australian job ads rebounded strongly last month, pointing to the likelihood that hiring may pickup, rather than slow further, in the months ahead.
After seasonal adjustments, it said that advertisements jumped by 1.5% to 179,245 in May, completely reversing all of the weakness, and more, seen in the prior three months.
“Job ads eased slightly [between February to April] alongside a loss of momentum in employment,” said David Plank, Head of Australian Economic at ANZ Bank, referring to a 0.7% drop in advertisements over that period.
“It is therefore quite encouraging to see job ads recover solidly in May to make a new high in the current uptrend.”
As seen in the chart above, not only did total advertisements lift to the highest level since 2011, the annual pace of growth accelerated, lifting to 11.5% from 8.7% in seasonally adjusted terms.
While one month does not make a trend, Plank says other lead indicators on employment are also continuing to improve, suggesting the slowdown in hiring seen in recent months may not continue throughout the year.
“Business conditions, profitability and capacity utilisation are all either at or near record levels,” he says.
“As a consequence, despite somewhat mixed employment reports this year, we remain of the view that Australia’s labour market will remain solid through 2018.”
Plank, like the Reserve Bank of Australia (RBA) and Australian Treasury, expect solid employment growth to lead to a gradual decrease in the Australia’s unemployment rate, an outcome that will help to boost wage and inflationary pressures, two preconditions that will likely be required before the RBA begins to lift official interest rates.
In the year to March, underlying consumer price inflation rose by a shade under 2%, just below the bottom of the RBA’s 2-3% medium-term target.
Over the same period, hourly wage growth, excluding bonus payments, increased by 2.07%, well below the 3.5% level the RBA believes will be required to return underlying CPI to the midpoint of its target.
The RBA, like others, believes that Australia’s unemployment rate will need to decline to around 5% or lower before wage pressures begin to build.
While that appears some way off at present, the rebound in job advertisements in May offers an encouraging signal that the recent increase in unemployment could begin to reverse in the months ahead.
The ANZ job ads survey uses data from Seek.com.au and the Department of Employment’s Australian JobSearch site, Jobsearch.gov.au. Each site provides data from a select day that is deemed to be broadly representative of activity levels seen during the month.