Better Australian employment growth in November with unemployment rate still low

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AMP Capital expert
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Registered: ‎11-03-2016

Better Australian employment growth in November with unemployment rate still low

[ Edited ]

Employment growth rose by 39.1K in November, beating consensus estimates of a 17.5K lift. The participation rate lifted to 64.6% and the unemployment rate increased from 5.6% to 5.7%. Last month’s job gains were also revised higher. So overall, it was a good employment report.

 

Jobs growth in Australia has slowed from 2% in early 2016 to 0.7% currently, which is a big change. Slower full-time jobs growth has been a big driver of softer employment growth. Full-time jobs growth was strong in November (+39.3K) but annual full-time jobs growth is still negative (-0.3%). Part-time employment growth has been much stronger over the past month (+2.9%pa) but fell marginally in November. Industry jobs data (up to August 2016, with more up to date data released later in December) showed that the strongest growth in part-time jobs has been in accommodation, cafes & restaurants, administrative and support services and “other services”. Soft full-time jobs growth is a headwind to near-term consumer spending outcomes. And slow full-time jobs growth also indicates that there is spare capacity in the labour market. Australia’s underemployment rate remains high (at 8.9%) and captures those employees who want to work more hours, employees who want to move from part-time to full-time employment, etc. So despite a seemingly “low” unemployment rate at 5.7%, there is still spare capacity in the labour market. And this spare capacity is keeping a lid on wages growth.

 Diana graph 3.png

Source: ABS, AMP Capital

 

The leading indicators of employment growth (job vacancies and business hiring intentions) are still pointing to good jobs growth ahead so we are not expecting a sharp deterioration in labour market outcomes in the near-term.

Diana graph 4.png

Source: ABS, AMP Capital

 

While decent jobs growth is likely over the next few months, wages growth is not showing any signs of stronger momentum, which is a unhelpful for inflation. With inflation likely to undershoot RBA’s 2-3% target band alongside a weakening in domestic growth and a stubbornly high $A, we think that the RBA could still cut the cash rate again in the first half of 2017.

 

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