Unemployment falls to a 3-year low


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By CommSec

Labour force; Average weekly earnings

  • Employment rose by 26,200 in July after rising by 10,800 people in June (previously reported as a rise in jobs of 7,900). Full-time jobs fell by 45,400 while part-time jobs rose by 71,600. Economists had tipped a 10,000 increase in jobs.
  • Hours worked rose by 0.2 per cent in July. Hours worked are up by 1.1 per cent on the year.
  • Jobless rate: The unemployment rate fell from 5.8 per cent to 5.7 per cent in July. To two decimal points the jobless rate fell from 5.77 per cent to 5.72 per cent (lowest rate recorded in almost three years).
  • Industry wages: The average wage across Australia stands at $78,832. The highest average wage can be found in the Mining sector at $135,060 per year, followed by Finance & insurance services ($94,791). The lowest average wage is obtained by workers in the Accommodation and food services sector ($55,630), followed by Retail trade ($57,975).

What does it all mean?

The headline employment result was certainly encouraging. Over 26,000 new jobs were created in July and the unemployment rate fell to a three-year low of 5.7 per cent. However the breakup of the figures, suggests the labour market has been largely marking time over the last few months, influenced by election uncertainty. Hours worked lifted in July, however it has fallen for six out of the past nine months.

Given the month to month volatility it is better to look at the longer term results. And in that regard, employment has totalled almost 72,000 new jobs in the first seven months of 2016, compared with over 150,000 in the same period last year. And the results are markedly more polarising when you compare the growth in full-time jobs.

Full-time jobs growth has gone backward by almost 65,000 so far in 2016 compared with jobs growth of almost 90,000 in the same period last year. It is clear that a slowdown in hiring has taken place – a result that has also seemingly shown up in the more sedate growth in the job ads series earlier this year.

The softer results across the labour market mirror other indicators across the economy, including retail sales. It’s pretty clear that the sluggish first half of 2016 resulted in employers managing their major cost base (employees) more carefully.

Importantly the election would have played a significant part in the pullback in hiring momentum over the first half of the year. And you could easily argue that the employment results are backward looking. Highlighting the economic environment 4-5 months ago. The hope would be that now the election is out of the way consumers and businesses will go back to spending, investing and hiring - particularly given the ultra-low interest rates on offer and significant improvements in the household budget.

The Reserve Bank is likely to look through the latest result and wait on timelier forward looking data. Recent Reserve Bank commentary suggests policymakers are relatively optimistic about Australia’s medium-term growth prospects. Over the next few months the Reserve Bank would be looking at the impact of the last couple of rate cuts. Further rate cuts are more dependent on inflation outcomes, and from that regard CommSec expects another interest rate cut in November.

As highlighted yesterday by the wage price index, wage growth at present is modest. Wages are still growing, and out-pacing inflation, by the largest margin in 3½-years. Real wage growth exists, while higher home prices, lower petrol prices and lower borrowing costs are also supporting spending power.

What do the figures show?

Labour force:

  • Employment rose by 26,200 in July after rising by 10,800 people in June (previously reported as a rise in jobs of 7,900). Full-time jobs fell by 45,400 while part-time jobs rose by 71,600. Economists had tipped a 10,000 increase in jobs.
  • Hours worked rose by 0.2 per cent in July. Hours worked are up by 1.1 per cent on the year.
  • The unemployment rate fell from 5.8 per cent to 5.7 per cent in July. To two decimal points the jobless rate fell from 5.77 per cent to 5.72 per cent (lowest rate recorded in almost three years). The trend unemployment rate was steady at 5.7 per cent (hasn’t been lower in three years).
  • The participation rate was steady at 64.9 per cent.
  • A total of 219,800 jobs were added over the year to July. The annual growth rate held steady at 1.9 per cent. In trend terms, employment has risen for 32 consecutive months.
  • The working age population rose by 24,800 in July. The working age population rose by 291,600 over the last year. The working age population is up 1.51 per cent over the past year – strongest growth in two years.
  • Unemployment across states in July: NSW 5.2 per cent (June 5.3 per cent); Victoria 5.9 per cent (5.7 per cent); Queensland 6.1 per cent (6.4 per cent); South Australia 6.4 per cent (7.0 per cent); Western Australia 6.3 per cent (5.7 per cent); Tasmania 6.2 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory fell from 3.7 per cent to 3.5 per cent; ACT unemployment fell from 3.7 per cent to 3.6 per cent.
  • Jobs across states and territories in July: NSW +1,400; Victoria +2,100; Queensland +12,300; South Australia +3,000; Western Australia +3,500; Tasmania -700. Trend terms: Northern Territory +700; ACT +600.

Average Weekly Earnings:

 

  • Average weekly ordinary time earnings rose by 1.2 per cent in the six months to May 2016 to be 2.1 per cent higher than a year ago. Male wages rose by 1.4 per cent over the year while female wages rose by 3.4 per cent.
  • Average weekly total earnings rose by 2.1 per cent over the year.
  • The average wage in May 2016 was $78,832.
  • Wages rose most over the year in Rental, Hiring, and Real estate services (up 11.7 per cent), Transport, Postal and Warehousing (up 6.1 per cent) and Information, Media and Telecommunications (up 5.4 per cent).
  • Wages were weakest over the past year in Professional, Scientific and Technical Services (down 0.4 per cent), Construction (up 0.4 per cent) and Accommodation and Food Services (up 0.8 per cent).
  • Across states & territories, we have calculated average annual wages as follows: NSW $80,132, Victoria $75,634, Queensland $75,936, South Australia $73,575, Western Australia $88,327, Tasmania $69,404, Northern Territory $81,624 and ACT $89,721.
  • The highest average wage can still be found in the highest average wage can be found in the Mining sector at $135,060 per year. Next highest is Finance & insurance services ($94,791) followed by Information media & telecommunications ($93,938), and Professional, scientific & technical services ($90,802).
  • The lowest average wage is obtained by workers in the Accommodation and food services sector ($55,630), followed by Retail trade ($57,975), “Other services” ($61,625) and Administrative and Support Services (66,721).

 

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.

The Australian Bureau of Statistics provides seasonally adjusted and trend estimates of industry data. The Federal Chamber of Automotive Industries releases estimates of car sales on the third business day of the month. The figures highlight the strength of consumer spending as well as conditions facing auto & components companies.

What are the implications?

While the lift in job numbers adds to spending power, probably more important is job security. Those with jobs will be heartened at the low jobless rate, giving them confidence to spend.

It is clear that consumers continue to win, while retailers continue to compete hard for available business. Future rate cuts are wholly dependent on inflation. If the next inflation figures (due out late October) remain benign then the Reserve Bank Board members will look to cut rates in again in November.


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