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Unemployment rate the least important number in ‘stellar’ jobs data

Related Story: Unemployment falls to four-and-a-half-year low at 5.4pc

Unemployment is at a four-and-half-year low. Sounds good, except that the unemployment rate is still 5.4 per cent, above what most economists consider a desirable balance — something around 5 or below.

Key points:

  • An estimated 61,600 jobs created in November, 41,900 full-time, 19,700 part-time
  • Unemployment steady at 5.4 per cent but underemployment falls to 8.3 per cent
  • Australia's has now had 14 consecutive months of jobs growth

But sometimes the unemployment rate is the least important number in the ABS Labour Force report, and November was one of those months.

The far more important number is the 61,600 jobs created last month.

The main reason that so many extra jobs were added but unemployment did not fall was that the proportion of people in work or looking for it jumped to 65.5 per cent, which is further good news for the economy.

More important still is that two-thirds of those were full-time positions (41,900).

Over the past year, more than 300,000 extra full-time jobs have been created.

All these extra full-time positions have pushed up hours worked, which rose 0.6 per cent last month.

More full-time work is also finally eating into the record underemployment that Australia had at the beginning of the year.

The quarterly underemployment figure fell 0.2 percentage points to 8.3 per cent, which is still high but is a lot better than the peak of 8.9 per cent in February.

What's more, this is no flash in the pan — the more stable trend data are now well and truly reflecting this increase in full-time jobs.

Kate Hickie from Capital Economics summed up this year's run of jobs data.

"It has been a stellar year for the labour market, which should provide some support to income growth," she wrote.

CommSec's senior economist Ryan Felsman said there is a jobs "record in sight".

"More Aussies are looking for work. More people are finding work. More employers are hiring workers and seeking employees," he said.

"In fact there have been 14 straight months of job gains. The longest stretch ever is 15 consecutive months from May 1993."

The results continue to be so good that they keep catching most analysts by surprise — the typical forecast was for just 18,000 jobs to be added — and that has seen the Australian dollar take another step higher on the news, now at 76.67 US cents.

Most still expect a payback at some point.

Sarah Hunter from BIS Oxford Economics maintains that the stellar results can't last, but acknowledges that they should provide a welcome boost for households in the meantime.

"Employment growth will still slow as we move through 2018 — 3+ per cent increases year-on-year are not sustainable in the long run — but the continued strong performance does present some upside risk for households and consumer spending," she wrote.

The remaining question, given this long run of stellar jobs numbers, is where is the wage growth?

Kate Hickie suggests one answer.

"The underutilisation rate is still comfortably above its post crisis average of around 13 per cent, so there is still a long way to go," she observed.

"As a result, we expect wage growth will only rise from 2 per cent to around 2.5 per cent by the end of 2019.

"That would be well below the pre-crisis average of 3.5 per cent."

The main reason that unemployment and underemployment aren't falling faster in the face of "stellar" jobs growth is the combination of a rapidly growing population and rising participation.

That increase in participation may in turn be explained by Australians' record debts and low wage growth — perhaps people are going back to work and trying to up their hours in an effort to make ends meet and keep up with their mortgage repayments and rising power bills amid weak pay rises?

Original Article

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