- Employment fell by 3,900 in August, which was well below market expectations for a 15,000 gain but did follow stronger than expected growth of 26,000 in July. Annual jobs growth has slowed from an unsustainable 3% year on year late last year, but is still solid at 1.5% year on year.
- Full time jobs rose by 11,500 and part time jobs fell, but the overall picture of weak full time jobs growth (up just 0.4% yoy) and strong part time jobs growth ( up 4.1% yoy) remains. The high part time component in jobs growth over the last year is also evident in total hours worked rising just 0.7% over the last year.
- While unemployment fell to 5.6% (from 5.7%) this was due to a fall in the proportion of the working age population looking for a job.
As is often the case, the monthly jobs numbers are messy – either bouncing around randomly from month to month or having contradictory components – and the August data is no exception. But the basic message is that the labour market is still solid – employment growth at 1.5% year on year remains robust and the continuing downtrend in the unemployment rate from last year’s high of 6.3% is a positive sign. However, its not quite as strong as it looks because full time jobs growth is weak and the fall in the unemployment rate has been exaggerated by weaker participation (although this may be partly due to the aging population).
The continuing softness in full time jobs and record low nominal wages growth may partly explain why to many Australians the economy doesn’t feel as strong as the good GDP growth data suggests.
Looking ahead, forward looking indicators of jobs growth including the ANZ job vacancy survey and employment intentions in the NAB business survey point to solid employment growth. Very low wages growth are likely helping on this front.
The August jobs figures are probably neutral for the RBA and the cash rate outlook. Our view remains that the RBA will cut rates again to further reduce the downside risks to inflation and maintain downwards pressure on the value of the $A, but with economic growth holding up very well this is a close call and is now very depended on a lower than expected September quarter inflation outcome.