Originally published by AMP Capital
- Employment rose by 44,000 in August of which full time jobs rose by 33,700.
- Annual jobs growth remains strong at 2.5% yoy, and full time jobs growth over the last year of 2.4% yoy has been similar to 2.7% yoy growth in part time employment.
- Annual growth in hours worked has also slowed but at 2.1% year on year it’s still solid.
- Unemployment was flat at 5.3% as the participation rate rose.
While jobs growth has slowed it clearly remains strong and the concern around jobs growth being dominated by part time jobs has clearly faded over the last year with full time jobs growth being strong too.
Our jobs leading indicator (based on job vacancies, job ads and hiring plans) is off its highs but it remains strong suggesting that jobs growth will remain solid.
The strength in jobs growth is eating into unemployment but only gradually because the civilian population of working age is growing strongly at 1.6% year on year and labour force participation has been trending up over the last few years driven by rising female participation. The strong labour market has also cut into underemployment which fell to 8.1% in August from 8.5% in May. However, total labour market underutilisation (ie, unemployment plus underemployment) remains very high at 13.4% in contrast to the US where its fallen to 7.4% which is about as low as it ever gets. As a result, the pick-up in wages growth is likely to remain very gradual in contrast to the US.
Implications
The strong labour market is clearly a source of strength for household incomes and if sustained points to stronger wages growth. However, still high labour market underutilisation points to the pick-up in wages growth being very gradual and it will be a while before its consistent with the midpoint of the RBA’s inflation target. As such we remain of the view that the RBA will leave interest rates on hold out to 2020 at least.