6min read
PREVIOUS ARTICLE Stocks to watch NEXT ARTICLE Aust shares close higher on banks, miners

Unemployment rate falls to 5½-year lowLabour force
Employment rose by 50,900 in June after a 13,400 increase in May (previously reported as a rise of 12,000 jobs). Full-time jobs rose by 41,200 and part-time jobs rose by 9,700. Economists had tipped an increase in total jobs of around 17,000. Total employment is at a record-high 12.574 million.
Hours worked rose by 0.6 per cent in June and were up by 2.0 per cent over the year. Trend hours worked rose by 0.2 per cent in June and are up 2.6 per cent over the year.
The unemployment rate was unchanged at 5.4 per cent. But at 5.37 per cent it is the lowest unemployment rate in 5½ years. The participation rate rose from 65.5 per cent to 65.7 per cent – just below record highs.
Unemployment across states in June: NSW 4.7 per cent (May 4.9 per cent); Victoria 5.6 per cent (5.1 per cent); Queensland 5.9 per cent (6.2 per cent); South Australia 5.4 per cent (5.6 per cent); Western Australia 6.1 per cent (6.3 per cent); Tasmania 5.8 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory was steady at 4.1 per cent; ACT unemployment fell from 3.6 per cent to 3.5 per cent.
State/territory jobs: In seasonally adjusted terms, the largest increase in employment was in New South Wales (up 27,300 persons), followed by Queensland (up 14,800 persons), Western Australia (up 2,900 persons) and Tasmania (up 2,100 persons). The largest decrease was in Victoria (down 6,600 persons) and South Australia (down 1,200 persons). 
What does it all mean?
There has been a lot of chatter about the slowing in the Aussie jobs creation machine. But it was only five months ago that a record 427,100 jobs were generated over the year to January. And it was always going to be difficult to maintain such strong momentum. However, June’s blockbuster gain of almost 51,000 jobs was the best monthly outcome since November last year. The unemployment rate at 5.37 per cent is the lowest since November 2012. 
Each month employers defy ‘doomsday’ expectations by hiring more workers. And the latest NAB business survey implies jobs growth of around 20,000 per month through to the end of the year.
Leading indicators of employment growth are still positive. In fact, the Bureau of Statistics’ job vacancies gauge rose by 24.1 per cent over the year to May – the strongest annual growth rate in 7½ years. And today SEEK released its latest job ads index which was up by 8.3 per cent over the year to June. While acknowledging a slowing in ads growth, SEEK, said: “Although job ad growth appears to be slowing, the job market remains strong. Average monthly job ads are still 29 per cent above 2010.”
And the Reserve Bank remains optimistic about the labour market. In its July 3 statement the Bank noted, ‘…the outlook for the labour market remains positive’ and observed ‘…the vacancy rate is high and other forward-looking indicators continue to point to solid growth in employment.’ And the Board also reiterated its expectation for a ‘gradual decline’ in the unemployment rate, and upgraded the language around skills shortages to ‘increasing’. Finding a skilled engineer or technician in the mining and energy sector must be a challenge presently with SEEK jobs ads up by 32 per cent over the year to June.
Hourly wages are creeping higher, signalling a continuing improvement in the jobs market. But businesses are still keen to cut costs and boost shareholder value rather than pass on pay increases to workers.
Overall, the labour market remains healthy. The proportion of Australians in work or looking for work remains near record highs. Workforce participation is just off record highs. But we, like the Reserve Bank, expect the unemployment rate to fall further (albeit gradually), leading to firmer growth of wages and prices.
What do the figures show?
Employment rose by 50,900 in June after a 13,400 increase in May (previously reported as a rise of 12,000 jobs). Full-time jobs rose by 41,200 and part-time jobs rose by 9,700. Economists had tipped an increase in total jobs of around 17,000. Total employment is at a record-high 12.574 million.
Hours worked rose by 0.6 per cent in June and were up by 2.0 per cent over the year. Trend hours worked rose by 0.2 per cent in June and are up 2.6 per cent over the year.
The unemployment rate was unchanged at 5.4 per cent. But at 5.37 per cent it is the lowest unemployment rate in 5½ years. The participation rate rose from 65.5 per cent to 65.7 per cent – just below record highs.
Unemployment across states in June: NSW 4.7 per cent (May 4.9 per cent); Victoria 5.6 per cent (5.1 per cent); Queensland 5.9 per cent (6.2 per cent); South Australia 5.4 per cent (5.6 per cent); Western Australia 6.1 per cent (6.3 per cent); Tasmania 5.8 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory was steady at 4.1 per cent; ACT unemployment fell from 3.6 per cent to 3.5 per cent.
State/territory jobs: In seasonally adjusted terms, the largest increase in employment was in New South Wales (up 27,300 persons), followed by Queensland (up 14,800 persons), Western Australia (up 2,900 persons) and Tasmania (up 2,100 persons). The largest decrease was in Victoria (down 6,600 persons) and South Australia (down 1,200 persons).
The working age population rose by 24,800 in June or 1.59 per cent to 20.24 million. Over the year the working age population rose by 317,400.
Why is the data important?
The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of nonprivate dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.
If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.
What are the implications?
The Aussie job creation machine has lifted up a gear. In a blockbuster month for the labour market, over 50,000  jobs were generated with over 80 per cent of these full time. And more people have been encouraged to look for work.
The last time the unemployment rate was this low, in late 2012, Macklemore and Ryan Lewis’ “Thrift Shop” was the number one single on the ARIA music charts. Aussie workers will identify with this, given that strong jobs growth is yet to translate into pay rises, crimping discretionary spending.
If the unemployment rate, however, continues to edge lower, this will potentially encourage policymakers at the Reserve Bank that there will be a lift in so-far elusive wages growth. The all-important Wages Prices Index for the June quarter will be keenly observed when released on August 15.
Of course, there is still spare capacity in the labour market. The “full employment” rate is considered to be around 5 per cent. And the underemployment rate remains steadfast at 8.5 per cent, while the underutilisation rate is elevated at 13.9 per cent (in May, next release is September).
The SEEK job advertisement data out today confirms our anecdotal evidence that there is strong demand for workers in mining, mining services, government services, construction and engineering.
CommSec expects official interest rates to remain on hold until at least February 2019.
Published by Ryan Felsman, Senior Economist, CommSec