Australia’s labour figures strengthened through January despite a lack of change in unemployment figures – a positive move that could stop the Reserve Bank from cutting interest rates in the near future.
On Thursday morning, ABS chief economist Bruce Hockman said the unemployment rate had “remained at 5.1 per cent for a second month” owing to “strong participation” in the labour force.
A deeper dive into the seasonally adjusted figures also found that the number of people employed in the country rose by 39,100. Much of the growth was driven by full-time roles.
Callam Pickering, APAC economist for jobs site Indeed, said the pick-up in full-time employment has helped to push the underemployment rate down from 8.3 per cent in December 2018 to 8.1 per cent in January 2019.
“That was enough for the underutilisation rate, the best single measure of labour market slack in Australia, to drop to 13.2 per cent – its lowest level in over five years,” he said.
BIS Oxford Economics analyst Sarah Hunter said the result was positive, especially the lift in full-time work. But she remained cautious about the nation’s economic outlook.
“Strong employment growth will help to support consumer spending and therefore GDP growth, but households continue to face weak growth in wages and other sources of income,” she said.
However, Ms Hunter said the steady jobless rate would likely mean the official cash rate remained on hold this year.
“Growth will be strong enough to not require a cut, but not strong enough to warrant a rate rise until the end of 2020 at the earliest,” she said.
Underutilisation weighs on wages
While the underutilisation rate has dipped, Mr Pickering said it was “still much too high” and was stifling wages growth.
“We are unlikely to see wage growth of 3 per cent or higher until the underutilisation rate pushes below 12 per cent,” he said.
“That could take at least another couple of years, notwithstanding a potential slowdown as house prices continue to soften and business conditions moderate.”
Mr Pickering’s comments follow Wednesday’s release of ABS’ wage growth figures, which showed wages had inched up only 0.5 per cent in the three months to December. That was marginally below the 0.6 per cent growth predicted.
Figures give dollar a boost
The ongoing strength in jobless figures was good news for the Australian dollar.
Commonwealth Bank’s sharebroking arm CommSec said the dollar “firmed and is hovering around 72 US cents” following the release of the figures.
However, the “better than expected” result weighed on the benchmark ASX 200 share market index because it was “scotching talk of rate cuts”, CommSec said, driving the market downwards towards lunchtime.
By 3pm, however, those losses had been regained and the index was up 0.84 per cent.
– With wires