Finance Your Budget Wage growth set to remain ‘sluggish’ after unemployment edges upwards

Wage growth set to remain ‘sluggish’ after unemployment edges upwards

Unemployment grew in November, making an increase in wage growth less likely. Photo: AAP
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Unemployment and underutilisation edged upwards in November, making an uptick in wage growth unlikely in 2019.

The latest ABS labour force numbers, released on Thursday, show the unemployment grew by 12,500 to 683,100 people – pushing the national jobless rate up from 5 per cent to 5.1 per cent.

Part-time employment grew by 43,400, while full-time employment fell by 6400.

Economist Callum Pickering said the figures were “less positive” than in previous months and the 0.3 per cent increase in underutilisation was a concern.

“The underutilisation rate has a strong relationship with wage growth. Unfortunately this suggests that sluggish wage growth will again be a feature of the economy in 2019,” he said.

“Downgrades to the wage forecast by the RBA and Treasury are all but certain.”

Trend unemployment decreasing

Despite the slight uptick in unemployment in November, both the ABS and Mr Pickering noted that trend unemployment continued to fall.

Unemployment rates:

A graph showing the decline in trend unemployment.
Trend unemployment has continued to move downwards over the past twelve months, according to ABS data. Source: ABS

“In November 2018, trend employment increased by 28,800 persons. Full-time employment increased by 19,300 persons and part-time employment increased by 9500 persons,” the ABS said.

In the past year, trend employment has grown at 2.4 per cent, above the average 2 per cent year-on-year growth average.

Mr Pickering said this latest dip should be “viewed with some caution” due to month-to-month volatility. The Reserve Bank would be “reasonably happy” with the current labour force numbers, but challenges were starting to emerge.

“Employment growth continues to be positive and with around 285,000 people finding employment over the past year, plenty of progress has been made,” he said.

“Yet cracks are beginning to show, particularly surrounding the property market, and that might spill over to employment next year.”