Labour force
- Employment rose for the 11th straight month, up by just 500 jobs in June after a revised 45,300 increase in jobs in May (previously reported as a 42,300 increase in jobs). Full-time jobs rose by 21,100, but part-time jobs fell by 20,600. Economists had tipped an increase in total jobs of around 9,000.
- Hours worked were broadly flat in the month to be up 1.6 per cent over the year. In trend terms, hours worked were also flat to be up 2.0 per cent on the year.
- The unemployment rate was steady at 5.2 per cent in seasonally adjusted terms. In trend terms the jobless rate was also steady at 5.2 per cent after being revised-up by 0.1 per cent in May.
- Participation rate: The participation rate was unchanged at a record-high 66.0 per cent in June. In trend terms, the participation rate rose from 65.9 per cent in May to a record high of 66.0 per cent in June.
- Unemployment across states in June: NSW 4.6 per cent (May 4.6 per cent); Victoria 4.8 per cent (4.6 per cent); Queensland 6.5 per cent (6.2 per cent); South Australia 5.9 per cent (5.7 per cent); Western Australia 5.8 per cent (6.2 per cent); Tasmania 6.8 per cent (6.4 per cent). In trend terms, Northern Territory 4.6 per cent (4.6 per cent); ACT 3.4 per cent (3.4 per cent).
- Youth unemployment: Youth unemployment, as represented by people aged 15-24 years old, is back at 15-month highs of 12.0 per cent in June. And the underutilisation rate of younger Aussies has stagnated for a decade at just below 30 per cent.
A raft of companies is affected by the employment data but especially those dependent on consumer spending. Amongst stocks affected are Nine Entertainment, West Australian Newspapers, Seek Limited and McMillan Shakespeare.
What does it all mean?
- The Poms may have claimed the cricket World Cup in controversial circumstances, but when it comes to wages growth they are the undisputed champions. In fact, annual wages growth in the UK – as represented by average earnings excluding bonuses – rose by 3.6 per cent in the three months to May.
- With skills shortages driving down the jobless rate to 44-year lows of just 3.8 per cent, UK wages are growing at the fastest pace in eleven years.
- Why is this relevant ‘Down Under’? Well it serves to highlight that despite major obstacles to job creation – such as the impact on business spending from ‘Brexit’ – conditions in the UK labour market remain very favourable, courtesy of an extended period of policy stimulus by the Bank of England.
- So what can Aussie policymakers learn from this? Combined low interest rates, expansionary fiscal policy and productivity-enhancing structural reforms are all required to jolt Australia out of its current economic slumber.
- In response, the Reserve Bank has cut the cash rate over successive months to fresh record lows of just 1 per cent, after a 3-year period of inertia. Personal income tax cuts have followed after the Federal Election in a double dose of stimulus for the economy.
- Governor Philip Lowe recently said that “we could do better than the path we looked to be on” in a speech focused on labour market developments. The ‘full employment’ target has now been lowered from “around 5 per cent” to 4½ per cent by policymakers in an attempt to erode spare capacity and spur economic activity, hiring, wages and inflation growth.
- Policymakers are trying to arrest a slowdown in jobs growth, which is critical to consumer confidence, retail spending and income growth. But population growth remains solid and participation in the workforce from females and older Australians are near record highs. And Aussies want to work more hours, as represented by underemployment.
- At face value, national unemployment is still pretty low – not far off 8-year lows. Employment growth and hours worked both remain fairly solid too, despite easing in June. The jobless rates in New South Wales, Victoria and the ACT are below 5 per cent. But the ‘two-speed’ labour market – with high unemployment rates elsewhere – complicates policymaking. Different regions have different ‘wants and needs’ when it comes to job creation, as evidenced by disparate outcomes in various electorates in the Federal Election.
- Reducing interest rates and cutting personal tax rates to encourage businesses to hire more workers is a good start. And the continued increase in the minimum wage – by 3 per cent this year on top of the 3.5 per cent increase last year – will support lower income earners. But further productivity-enhancing reforms are required.
- And one segment of the Aussie community that often goes unnoticed is our younger people. Youth unemployment, as represented by people aged 15-24 years old, is back at 15-month highs of 12.0 per cent. And the underutilisation rate of younger Aussies has stagnated for a decade at just below 30 per cent.
- While younger Aussies often work part-time while studying at TAFE or university, targeted government policies and business investment incentives could be deployed to encourage younger people to be adequately trained for jobs where skills shortages exist. Often job vacancies don’t match the skills of candidates.
- For example, Australia is in the midst of an infrastructure boom and a mini-resurgence in mining activity, but we have insufficient engineers to fill job vacancies. And skills shortages in the science and technology industries remain high. Of course, these jobs aren’t for everyone and health workers and teachers are also highly valued and sought after.
What do the figures show?
- Employment rose for the 11th straight month, up by just 500 jobs in June after a revised 45,300 increase in jobs in May (previously reported as a 42,300 increase in jobs). Full-time jobs rose by 21,100, but part-time jobs fell by 20,600. Economists had tipped an increase in total jobs of around 9,000.
- Annual job growth fell from 14-month highs of 2.9 per cent in May to 2.4 per cent (decade average 1.7 per cent) in June.
- Hours worked were broadly flat in the month to be up 1.6 per cent over the year. In trend terms, hours worked were also flat to be up 2.0 per cent on the year.
- The unemployment rate was steady at 5.2 per cent in seasonally adjusted terms. In trend terms the jobless rate was also steady at 5.2 per cent after being revised-up by 0.1 per cent in May.
- The participation rate was unchanged at a record-high 66.0 per cent in June. In trend terms, the participation rate rose from 65.9 per cent in May to a record high of 66.0 per cent in June.
- Unemployment across states in June: NSW 4.6 per cent (May: 4.6 per cent); Victoria 4.8 per cent (4.6 per cent); Queensland 6.5 per cent (6.2 per cent); South Australia 5.9 per cent (5.7 per cent); Western Australia 5.8 per cent (6.2 per cent); Tasmania 6.8 per cent (6.4 per cent). In trend terms, Northern Territory 4.6 per cent (4.6 per cent); ACT 3.4 per cent (3.4 per cent).
- State/Territory jobs: In seasonally adjusted terms, jobs fell the most in New South Wales (down 17,400 persons), followed by Queensland (down 8,200 persons), South Australia (down 4,700 persons) and Victoria (down 4,100 persons). The only increase was in Western Australia (up 13,800 persons).
- The working age population rose by 25,900 in June to 20.59 million. Over the year, the working age population rose by 357,900 – a 6-year high – or 1.77 per cent, but this is still down from the record 2.36 per cent annual growth in December 2008.
- The monthly trend underemployment rate was steady at 8.3 per cent. The monthly trend underutilisation rate was also steady at 13.5 per cent.
- The monthly seasonally adjusted underemployment rate fell from 13.7 per cent to 13.4 per cent. And the monthly seasonally adjusted underutilisation rate fell from 8.6 per cent to 8.2 per cent.
- Youth unemployment, as represented by people aged 15-24 years old, is back at 15-month highs of 12.0 per cent in June.
Why is the data important?
- The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.
- If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.
What are the implications?
- While today’s jobs release was decidedly mixed, the national unemployment rate remained steady at 5.2 per cent and full-time jobs rebounded.
- And in a welcome development – measures of labour market slack – underemployment and underutilisation fell in seasonally adjusted terms in June. Overall, this provides the Reserve Bank with some breathing space for now.
- But Australia clearly has a ‘two-speed’ job market. Unemployment is low in New South Wales, Victoria and the ACT, but heading in the wrong direction elsewhere. That said, the pick-up in hiring in Western Australia in June was notable.
- Leading indicators of employment growth, however, have lost momentum. According to data released today by job search engine Seek, job ads have fallen by 7.7 per cent over the year to June. That said, advertised salaries are up by 2.7 per cent – an encouraging development.
- The Reserve Bank is expected to ‘sit pat’ for now, assessing incoming economic data and the reaction to policy stimulus over the coming months before deciding the next move for the cash rate.
- The Reserve Bank’s Board stands ready to act “if needed” to support the economy and job market. The end-of-month June quarter inflation data release is the next test.