Australian Unemployment - November

Australian Unemployment - November

Australian Unemployment

Data on Thursday showed that on a seasonally adjusted basis employment increased by 39,100 against expectations of only 17,500 and a previous reading of 15,200. The unemployment rate increased slightly to 5.7% from 5.6% a month earlier, but that’s not overly concerning given we saw an increase in the participation rate to 64.6% from 64.4% previously as more people actively sought work.


Month-to-month numbers can be quite volatile and seasonally adjusted figures can provide an overly optimistic picture. Therefore we look at the trend figures over the past year as they smooth out these seasonal adjustments.

Over the past twelve months the trend unemployment rate has decreased by 0.3% reducing the number of unemployed by 31,300 an trend employment rose 87,300. Part-time work continues to be the biggest driver labour gains, since 2015 125,100 part-time jobs have been added by full-time employment has fallen by 56,900.

There is nothing wrong with a labour market that is driven by part-time work, however what is concerning is the continued divergence between the unemployment rate and the underemployment rate (those who are working part-time and cannot find full-time work). In November the underemployment rate remained at 8.5% which has trended higher since 2008.

The chart below highlights the recent divergence between the two rates. This signals that there remains a significant degree of slack in the labour market despite the headline unemployment rate trending in the right direction.

Underemployment & Unemployment Rate



This slack is also seen in wage growth which fell to the lowest levels on record in the third quarter (1.9% from 2.1% prior). The next chart below highlights the steady decline over the past few years.

Wage Growth (YoY)

 

Consumer spending is likely to remain subdued given this slack and therefore ultimately keep inflation under target. The RBA most probably will keep rates on hold in the coming months, however the slack in the labour market suggests they should lean towards an easing bias. This is despite concerns they have raised around the build-up of leverage on balance sheets at historically low rates having previously stated a deterioration in the labour market would prompt action.

 

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