No rate rise pressure on the Reserve Bank from the two most sensitive data releases this week – Wednesday’s Wage Price Index for the March quarter and Thursday’s labour force figures for April.
The latter showed the unemployment rate rose by 0.1 percentage points to 3.7% in April but the Australian Bureau of Statistics said that was ‘rounded up (ie it was just under 3.7%).
That was a touch higher than the Reserve Bank’s estimate for June of 3.6% but the hours worked data told another story – one of more people working more hours than before because of a shortage of labour and unfilled positions.
The number of people either in jobs or looking for work (the participation rate) eased slightly, from 66.8% in March to 66.7%, according to the ABS, while the employment to population ratio also fell 0.2 percentage points to 64.2%.
“Even with these falls, both indicators were still well above pre-COVID-19 pandemic levels and close to their historical highs in 2022,” ABS head of labour statistics Bjorn Jarvis said.
Jarvis said in commentary on the data that: “with employment dropping by around 4,000 people and the number of unemployed increasing by 18,000 people, the unemployment rate rose to 3.7 per cent.”
“Even with these falls, both indicators were still well above pre-COVID-19 pandemic levels and close to their historical highs in 2022,” Mr Jarvis said.
The appearance of a slight weakness in April however was belied by the hours worked data.
The ABS said that the seasonally adjusted monthly hours worked increased by 2.6% in April.
“This was because fewer people than usual worked reduced hours over the Easter period,” Mr Jarvis said.
“The last time Easter and the survey period aligned like this was in 2015, when around 60 per cent of employed people worked fewer hours than usual. This Easter it was only around 55 per cent of employed people.
“This may reflect more people taking their leave earlier or later than usual, or that some people were unable to, given the high number of vacancies that we’re still seeing employers reporting.”
“The ongoing strength in hours worked over the past six months shows the demand for labour, to some extent, is being met by people working more hours,” Mr Jarvis said.
There was an added point in the data which showed full-time employment fell by 27,100 to 9,726,500 people and part-time employment increased by 22,800 to 4,155,600 people.
That’s a reversal of what we have seen several times in the past year when part time jobs fell and the number of full-time jobs rose – that’s normally a positive and showing rising demand for labour.
But when full time numbers fall and part time numbers rise, it’s usually a sign of weakening demand for full time labour. But the 2.6% jump in hours worked in the month belies that analysis because if full time worker numbers fall and part time numbers rise, hours work should also fall.
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Meanwhile the March quarter’s Wage Price Index came in on track with RBA expectations, showing an annual rise of 3.7% after a quarter-on-quarter rise of 0.8%, which was unchanged from the December quarter.
The 3.7% annual rate was the fastest rate since September 2012 but was nowhere near enough to give real wage gains against an annual inflation rate in the same quarter of 7%.
In the minutes of its May meeting earlier this month which saw a surprise 0.25% rate rise, the RBA warned that higher-than-expected wage growth in 2023 could derail its plan to reduce inflation, if productivity doesn’t lift.
This latest data and the fact that real wages continue to fall which will put more pressure on consumer spending while households struggle with cost-of-living pressures, higher interest rates and rents.
