More evidence yesterday that the economy is in better shape than some figures suggest, and certainly healthier than the moaners in retailing, some unions, analysts and economists believe.
Unemployment in May on a seasonally adjusted basis fell to a four year low of 5.5% yesterday (and remained steady on 5.7% on the more accurate trend basis).
The Australian Bureau of Statistics said that monthly trend full-time employment rose for the eighth straight month in May by a further 19,300, while part-time employment was up by 5,900 persons. That made a total 25,200 new jobs last month.
With more than 194,000 new jobs created in the past year and just over 120,000 of those coming from rising full time employment since last September, the labour market is now reflecting the strong growth it saw in 2015.
Yesterday’s data, along with parts of the March quarter GDP figures will provide some relief to Reserve Bank fears a month or two ago that the labour market was slowing (along with wages) to worrying levels, just as non-mining business investment was proving to be elusive and signs that dwelling investment was starting to fade
The RBA took some heart from the National Accounts for the March quarter and a rise in nominal GD growth to an annual of 7.7%, the highest for some years. As well growth emerged in non-mining business investment in the quarter for the first time for some quarters especially in engineering, (which helped offset a fall in dwelling investment), real labour unit costs fell to all time lows, to match the fall in real wages and wage growth generally, while there was another a small gain in productivity.
The AMP’s Chief Economist, Dr Shane Oliver wrote yesterday afternoon that “The RBA no doubt breathed a sigh of relief with today’s jobs data showing unemployment falling to its lowest since early 2013 (seasonally adjusted)”.
“Whatever it is, strong jobs growth provides welcome news after a run of soft data for GDP growth, consumer confidence, retail sales and housing related indicators,” Dr Oliver wrote.
"This will support the RBA in leaving interest rates on hold for now. Nevertheless with numerous other indicators remaining on the soft side – including overall economic growth, consumer spending, non-mining investment, indicators for housing construction and wages growth – our view remains that there is far more risk of another rate cut than a rate hike in the next 12 months. But to see a cut we will likely need to see a faltering in the jobs data” Doctor Oliver wrote.
“Full-time employment has increased by around 124,000 persons since September 2016, with particular strength over the past five months, at around 20,000 persons per month," said Chief Economist for the ABS, Bruce Hockman.
Over the past year, trend employment increased by 194,200 persons (or 1.6%), which is still below the average year-on-year growth over the past 20 years of 1.8%. It has doubled since December 2016, when the year-on-year growth was at 0.8%.
Another positive was trend monthly hours worked increased by 2.9 million hours (up 0.2%) to 1,677.7 million hours in May 2017. Most of this increase was hours worked by full-time workers, according to the ABS.
Dr Oliver did say that “the only problem of course is that underemployment remains very high at 8.8% leaving labour underutilisation high at 14.4%, albeit down from a recent high of 14.8% in February and this will act as an ongoing constraint on both wages growth and consumer spending.”
"The underemployment rate is an important indicator of the spare capacity of workers in Australia, and has risen for the sixth consecutive quarter to a historical high of 8.8 per cent," Mr Hockman said.
The trend underutilisation rate, which includes both unemployment and underemployment, remained at 14.5% in May 2017.
Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.
The seasonally adjusted number of persons employed increased by 42,000 in May 2017. 52,100 full-time positions were added to the economy while 10,100 part-time ones vanished (suggesting that they became full time jobs). The release easily beat forecasts from economists, who had tipped 10,000 new jobs in the month.
It was third strong month in a row seasonally adjusted with 46,000 new jobs reported in April and 53,000 in March. Seasonally adjusted the number of hours worked increased by 31.1 million hours in May, a 1.9% on April, the biggest rise in 11 years.
The seasonally adjusted unemployment rate decreased by 0.2 percentage points to 5.5%, and the seasonally adjusted labour force participation rate increased slightly to 64.9%.
“The trend unemployment rate has been relatively stable over the past 18 months, at around 5.7 to 5.8 per cent, while the seasonally adjusted rate has also been relatively constrained, between 5.5 and 6.0 per cent,” Mr Hockman added in the ABS statement yesterday.
