Australia’s unemployment rate fell to a new 48-year low of 3.4% in July but did we see the first hint of a weakness in the jobs market?
The Australian Bureau of Statistics (ABS) says the jobless rate dropped by 0.1 percentage points in July to a new multi-decade low.
The number of people formally unemployed dropped by 20,200 to 473,600, the lowest since August 2008.
But the number of people in work also dropped. Full-time employment fell by 86,900 (only partially offset by a 46,000 increase in the number of part-time workers).
The overall jobless rate fell largely because the participation rate – which tracks the number of people in work or looking for it – fell by 0.3 percentage points.
However, the pointed to a possible explanation – the latest flooding in parts of NSW in July as well as winter school holidays, factors many media reports failed to mention, even though the ABS mentioned them in its analysis on Thursday.
But first the jobs market remains unquestionably strong with fewer unemployed people (474,000) than there were job vacancies (480,000 in May),” the ABS pointed out on Thursday.
“With a fall in both employment and unemployment in July, the participation rate also fell, down 0.3 percentage points from its record high of 66.8 per cent to 66.4 per cent. It remained 0.5 percentage points higher than before the pandemic.
The participation rate also fell for both men and women (down 0.4 and 0.3 percentage points).
“The July reference period coincided with the winter school holidays, worker absences associated with COVID and other illnesses, and further flooding events in New South Wales,” the ABS pointed out.
Seasonally adjusted employment fell 41,000 people (0.3%) in July 2022.
“This is the first fall in employment since October 2021, following the easing of restrictions after the Delta lockdowns in late 2021.
“During the pandemic, it has not been uncommon to see larger-than-usual changes or slowing in employment and hours around school holidays,” Mr Jarvis said.
With the fall in employment, the employment to population ratio decreased 0.2 percentage points to 64.2%.
“In addition to people taking annual leave around the winter school holidays, there were also around 750,000 people working fewer hours than usual due to being sick in July 2022, around double the usual number we see during the middle of winter,” Mr Jarvis said.
“Given the extent of sickness within the community during July, some people who were on annual leave over the school holidays may have also been sick or caring for others,” he added
The jobs data follows this week’s wage price index that showed annual wage growth at 2.6 per cent over the 12 months to June. Over the same period, the inflation rate was 6.1 per cent. The 3.5 percentage points was the largest fall in real wages on record.
If anything, the wages data was worse than it seemed.
While wages edged up slightly in the year to June, the small rise was only achieved through a rebasing of the figures with a weak reading for the June, 2021 quarter falling out of the comparison.
Australian Bureau of Statistics (ABS) data for the June quarter on Wednesday showed that the Wage Price Index rose 0.7% in the quarter (the third quarterly rise of that amount) for an annual rise of 2.6%, the highest yearly rate since the September, 2014 quarter.
The improvement though only happened because the very weak June, 2021 quarterly’s annual reading of 1.7% dropped out of the comparison.
It is clear that from that low, there has been a rise in wages, but it has been slow, nowhere near as fast as suggested by policymakers and has been left behind by surging inflation at all levels.
The 2021-22 financial year growth of 2.6% was up from 2.4% for the year to March but with inflation running at 6.1% in the year to June, real wages fell 3.5%, the largest ever fall.
Private sector wages grew by 0.7% and public sector wages by 0.6% — the same outcome as in the March quarter — demonstrating public sector wages caps, even in Labor-run states – continue to weigh down wages growth.
Australian workers remain stuck with stagnant wages and huge real wage falls.
Real wages are in freefall elsewhere as well.
Tuesday Britain’s Office of National Statistics revealed that real wages in the UK fell a record 3.0% in the three months to June — despite unemployment of 3.8% in the June quarter when 160,000 new jobs were created (a similar situation to us, NZ, Canada, the US).
While average pay — excluding bonuses — increased by 4.7% in the June quarter according to the ONS, the cost of living is increasing at an even faster rate and outpacing wage growth. Including bonuses average pay rose an annual 5.1% but that was still far behind consumer price inflation which rose at an annual rate 9.4% in the June quarter. The Bank of England reckons it could reach 135 from October onwards.
Darren Morgan, ONS director of economic statistics, said UK real wages were “still dropping faster than at any time since comparable records began in 2001.”
The Kantar research group released data on Tuesday as well showing UK grocery prices jumped 11.6% in the four weeks to August 7 – that’s the highest rate of grocery price inflation since Kantar started collecting the data 14 years ago.
US wage growth is running (on an hourly wage basis) at just over 5% in the year to July (down from 5.7% in the year to January this year). US inflation is 8.5%, down from 9.1% and looking like it is weakening.
But that won’t stop American workers also seeing a fall in real wages as well.
