Unemployment rate falls to 3.9% - a record low

New data shows the unemployment rate has fallen to 3.9%, so why is wages growth sluggish?

This represents the lowest unemployment rate since 1974 - before that, the labour force data from the ABS was published quarterly.

March's unemployment rate was technically below the 4% threshold, but the ABS rounded up to 4%.

In April, employment rose by 4,000 and unemployment decreased by 11,000.

This was slightly behind ANZ economists' forecasts of a 3.8% unemployment rate.

"Last April, due to Easter being early and during the survey period, there was an exaggerated seasonal effect which saw employment drop against expectations," said Felicity Emmett, ANZ senior economist.

The underemployment rate also lowered by 0.2 percentage points to 6.1%, while underutilisation (unemployment plus underemployment) decreased 0.3 points to 10.0% - the lowest figure since 2008.

The participation rate lowered by 0.1 percentage point to 66.3%.

So why the slow wages growth?

Wages data released Wednesday was more sluggish than expected at 2.4% on an annualised basis, and 0.7% for the quarter.

When compared to inflation at 5.1%, this implies workers' wages are going backwards in real terms.

AMP Bank senior economist explained why positive labour data can actually be bad for wages growth.

"Australian wages growth has been constrained because the supply of labour has increased since the beginning of the pandemic with the labour force participation rate now at a record high," Ms Mousina said.

"High labour underutilisation over recent years has also kept a lid on wages growth."

The participation rate has been at 40-year highs in recent months, at more than 66%.

This is well ahead of other advanced economies including Canada (65%), the United Kingdom (63%), and the United States (62%).

Comparatively, annual wages growth has been stronger in the UK (3.8%), and the US (9%), and even with Canada (2.4%).

That said, inflation is much higher in these countries with the UK hitting its highest level in 40 years at 9%.

The US' is 8.3%, while Canada's is at a 31-year high at 6.8%.

"Unemployment rate falls to 3.9% - a record low" was originally published on Savings.com.au and was republished with permission.