Conditions in Australia’s labour market were stronger than expected in August amid a broader context that indicates gradual progress is being made in line with Reserve Bank of Australia (RBA) forecasts.
Labour Force Survey — August | By the numbers
- Employment increased by 44,000 in August, which was well ahead of the market forecast for +18,000. July’s initially reported decline of 3,900 was widened to 4,300.
- Unemployment rate remained at 5.3% (market f/c was 5.3%)
- Participation rate increased 0.1ppt to 65.7% (prior revised 65.6%)
- Hours worked were flat in August, which eased annual growth to 2.1%
Labour Force Survey — August | The details
This survey was strong on the detail, which balances out the weakness from the previous month. Volatility of this nature is commonplace in this survey.
Employment increased 44,000 in August but fell 4,300 in July. If those outcomes are averaged, employment increased by 19,850 per month — close to the level of around 20,000 required to keep the nation's unemployment rate steady.
Within August's 44,000 increase; full-time work gained 33,700 and part-time lifted 10,200. Employment growth on an annual basis held at a solid 2.5%.
At 2-decimal places, Australia's participation rate lifted 0.16ppt to 65.71. This equated to the labour force increasing by 49,780, which was mostly met by the 44,000 gain in employment. The headline unemployment rate is now 5.31% — little changed from July's 5.29%.
An encouraging aspect of the survey was the improvements to measures of excess labour market capacity.
The underemployment rate — workers wanting more hours as a percentage of the labour force — declined by 0.4ppt to 8.1%, while the underutilisation rate — including the underemployed and unemployed as a percentage of the labour force — declined by 0.5ppt to 13.4%.
Both measures are now at their lowest levels in 4-5 years, although they remain elevated by historical standards having only receded gradually over the past couple of years. Further erosion in excess capacity in the labour market is key to stronger wages growth.
Working against a stronger and quicker reduction in excess capacity has been the rapid pick-up in labour force participation over the past couple of years. This has been a function of rising employment growth and strong growth in the working-age population.
Total hours worked are running slightly ahead of the level from a year ago (+2.1%), but after adjusting for employment growth, average hours worked per employee per month have declined marginally (-0.4%Y/Y).
Across the states, unemployment rates declined in New South Wales (-0.2ppt to 4.7%), Victoria (-0.2ppt to 4.8%) and Tasmania (-0.5ppt to 5.8%). South Australia was steady at 5.7%. There were increases in Queensland (+0.2ppt to 6.4%) and Western Australia (+0.4ppt to 6.4%). Of concern is Queensland, where the state's unemployment rate is sharply diverging from New South Wales and Victoria.
The breakdown of state employment growth is shown in the chart, below.
Labour Force Survey — August | Insights
Australia's labour market appears to be making gradual progress, which is in line with the expectations of the RBA. While employment growth has moderated from the very strong pace of earlier this year, it remains solid and is tracking above growth in the working-age population. This will help to reduce excess capacity, though strong workforce participation is likely to ensure this remains a gradual proposition with little meaningful near-term impact for wages growth.
