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Australia’s unemployment rate falls to 5.6% as jobs grow for 10th month

Australia’s unemployment rate falls to 5.6% as jobs grow for 10th month

CANBERRA: Australia’s unemployment rate declined to 5.6% in July, down from 5.7% in June. Data shows employment grew by 27,900 jobs in July and jobs growth has continued for 10 months in a row – the longest positive monthly streak since 2010. Over the past 12 months, there have now been 239,373 jobs created, in seasonally adjusted terms, at an annual growth rate of 2% – up from 0.9% in February. Over the same period, full-time employment has increased by 197,700 people (2.4% annual pace), while part-time employment has increased by 41,600 people (1.1% annual pace). Economists say the labour market appears a bit more “robust” than it was during its soft patch last year, helping to “cushion” workers from the economy’s record low wages growth of 1.9%. According the Bureau of Statistics (ABS) this week, the economy has now recorded the 20th consecutive quarter of falling wages growth for private sector workers.

The National Australia Bank economist Tapas Strickland said it was likely the unemployment rate could keep declining from 5.6%, since trend employment growth was “well above” the break-even level of 15,500 jobs a month that is needed to keep the unemployment rate unchanged. “If this trend rate of growth continued, it would be enough to drop the unemployment rate by 0.1% every two months assuming a constant participation rate,” he said. The Turnbull government is promoting the fact that nearly 240,000 jobs have been created in the last 12 months and some economists agree the labour market has some “solid momentum”. “The pace of employment growth, and particularly full-time jobs growth, has clearly cranked up more than a few notches as 2017 has progressed,” Commonwealth Bank economist John Peters said. “Over the past six months, monthly jobs growth has averaged 33,000 per month … [and] the split between full-time and part-time jobs growth has altered substantially in the past six months or so, and in the right direction towards full-time jobs creation.” Other economists are less sanguine. Paul Dales, the chief economist of Capital Economics, said the growth in full-time jobs over the past year had “gone a long way to reversing” the trend of the previous four years, when businesses preferred to take on part-time workers, but he remained unconvinced that the labour market “has, once and for all, turned a corner”. “The past volatility of the data suggests it’s wise not to get too excited,” he said. “But the recent improvement poses an upside risk to our cautious gross domestic product growth, inflation and interest rate forecasts.”

Dales warned in June that the share of national income going to workers was close to a 50-year low because the extra income generated by recent soaring commodity prices had “all gone into the pocket of business”. Peters agreed that despite the strong growth in employment in recent months there was still plenty of spare capacity in the jobs market. He said the underemployment rate was running at 8.8% in May and, in conjunction with the June unemployment rate of 5.6%, the labour underutilisation rate was still running above 14%, at 14.4%. “We will need to see further sustained robust employment growth to really see this [underutilisation rate] dropping to zones which may be a precursor of intensifying wage pressures,” he said. July’s employment growth was driven by an increase in the participation rate, which rose 0.1% to 65.1% – its highest since January 2016.