Australian employment strong in August; unemployment rate rises to 5.3%

For the second straight month, employment growth surprised strongly to the upside of market expectations, though the national unemployment rate lifted to 5.3% in August to be at its highest level in a year.   

Labour Force Survey — August | By the numbers

• Employment increased by a net 34.7k in seasonally adjusted terms; well clear of the median expectation for a gain of 15k. July's initially reported increase of 41.1k was revised down 36.4k.

• The national unemployment rate lifted to 5.3% from 5.2%, where it had been anticipated to remain unchanged.
• Underutilisation lifted to 13.8% from 13.7% (revised from 13.6%), while underemployment hit 8.6% from 8.4% in the previous month. 

• Workforce participation increased by 0.1ppt to a new record-high of 66.2% (exp: 66.0%).

• Aggregate hours worked lifted by 0.2% in August (prior 0.5%) to 1.78bn hours with the annual pace ticking up from 1.9% to 2.0%.

Labour Force Survey — August | The details 

The headline unemployment rate lifted from 5.2% to 5.3% in August to be at its highest level in a year. However, rounding overstates the magnitude of the change; at 2 decimal places, it went from 5.24% to 5.25%, just as it did for the trend series data. This continues a gradual rise in unemployment after it ended 2018 at 4.98%.For the 4th time in the past 5 months, Australian workforce participation reached a new record high after rising by 0.1ppt to 66.2%. In absolute terms, this equated to participation rising by 38.8k in the month. This was faster than growth in employment at 34.7k, so as a result there was a 4.1k rise in unemployment to 716.8k. 

Looking further into August's 34.7k rise in employment, the composition was volatile with full time falling by 15.5k (its weakest month since May 2018) and part time surging by 50.2k (its strongest month since January 2017). 

In annual terms, total employment growth was little changed at 2.46% compared to 2.5% in July, though growth in full time work retraced from 2.81% to 2.16% as part time accelerated from 1.82% to 3.11%. In recent months, annual growth in the full time segment has slowed, though part time has picked up and this has helped to maintain an overall robust pace in employment.    

Notwithstanding robust employment growth, not only did the unemployment rate pick up in August there was also a rise in underemployment (counting workers who want and are able to work additional hours) from 8.4% to 8.6% and underutilisation (unemployed and underemployed) increased from 13.7% to 13.8%. Both of these measures returned to where they were back in May earlier this year. 

Aggregate hours worked were able to build on the 0.5% rise from July with a lift of 0.2% in August to 1.78bn hours. In annual terms, growth in aggregate hours worked was up marginally to 2.0% from 1.9% in July. However, once adjusted for the increase in employment, average hours worked per employee were virtually unchanged in August at 137.9 hours, which is 0.4% lower than it was a year ago. 

Turning to the states, the details were mixed in August. Unemployment fell in New South Wales (from 4.4% to 4.3%) and in Western Australia (from 5.9% to 5.8%), though it increased in Victoria from (4.8% to 4.9%), South Australia (from 6.9% to 7.3%) and Tasmania (from 6.0% to 6.4%). Queensland's unemployment rate remained at 6.4%.   

Employment outcomes in August were led by Victoria at +20.3k, followed by New South Wales with +16.7k. However, it was fairly bleak elsewhere with Western Australia +3.6k, South Australia +1.4k, Tasmania -0.1k and Queensland -7.2k.

Labour Force Survey — August | Insights

Once again we saw a strong monthly employment outcome, though on this occassion it was outpaced by another rise in participation. On the back of the rise in unemployment, underemployment and underutilisation, market expectations for a Reserve Bank of Australia rate cut as early as October have firmed to around a 3 in 4 chance.