Unemployment rate hits 48-year low

• Employment rose by 88,400 in June (consensus: +30,000) with full-time jobs up by 52,900 and part-time jobs lifting by 35,500. Total employment hit a record high of 13.6 million in June.

• The unemployment rate fell from 3.9 per cent in May to 3.5 per cent in June (lowest since August 1974). The number of unemployed fell by 54,300 in June.

• The participation rate rose from 66.7 per cent in May to a record high of 66.8 per cent in June. The employment to population ratio hit fresh record highs of 64.4 per cent in June.

• The underemployment rate rose from a 14-year low of 5.7 per cent to 6.1 per cent in June. And the underutilisation rate was steady at a 40-year low of 9.6 per cent in June (lowest since April 1982).

• Hours worked fell less than 0.1 per cent to 1,856 million in June, but was up 3.8 per cent on a year ago.

• Unemployment across states/territories in June: NSW 3.3 per cent, a record low (May: 4.0 per cent); Victoria 3.2 per cent, a record low (3.7 per cent); Queensland 4.0 per cent, equal 13½-year low (4.0 per cent); South Australia 4.3 per cent (4.6 per cent); Western Australia 3.4 per cent (3.1 per cent); Tasmania 4.3 per cent (4.5 per cent); Northern Territory 3.7 per cent (4.1 per cent); ACT 3.1 per cent (3.3 per cent).

• Employment across states/territories in June: NSW +25,700; Victoria +28,500; Queensland +13,400; South Australia +500; Western Australia -9,100; Tasmania -1,200; Northern Territory -5,500; ACT flat.

What does it all mean?

• Australia’s great jobs boom continued in June with the economy adding another 88,400 positions. Employment lifted for an eighth consecutive month following the easing of Covid-19 lockdown restrictions in late 2021. Australia’s labour market is incredibly tight with almost the same number of unemployed people (494,000) and vacant jobs (481,000), according to data released today by the Australian Bureau of Statistics (ABS).
• Average employment growth in the past three months (to June) of 51,200 positions is much stronger than the pre-pandemic trend growth of around 20,000 positions per month. And recruitment activity has been so buoyant that a massive 438,000 jobs have been added by the Aussie economy over the past year.

• What is even more remarkable is Australia’s unemployment rate, which has hit multi-decade lows. The jobless rate fell from 3.9 per cent in May to a staggeringly low 3.5 per cent in June, the lowest rate since August 1974. An unemployment rate below 4.0 per cent is broadly consistent with “full-employment”, with the Federal Treasury’s estimate of “full-employment” even higher at between 4.5 per cent and 5.0 per cent.
• In June, full-time employment lifted by 52,900 in another sign of labour market strength with employers keen to lock-in permanent staff on higher wages, given acute skills shortages. Nationally, the 3.4 per cent unemployment rate for females was the lowest since February 1974 and the 3.6 per cent jobless rate for men was the lowest since May 1976. The youth unemployment rate fell from 8.8 per cent in May to a near 14-year low of 7.9 per cent in June (lowest since August 2008).
• Such is the strength of the labour market, a record 13.6 million Aussies were employed at the end of June. Record high job vacancies, higher pay packets and rising cost of living pressures are encouraging more workers to look for a job, to increase their hours of work, or to switch jobs.
• Australia’s labour force participation rate hit an all-time high of 66.8 per cent last month. The female participation rate rose from 62.3 per cent in May to 62.5 per cent in June, the highest recorded since February 1978, when the ABS began recording monthly job numbers. And the male participation rate of 71.2 per cent in June was the equal highest rate since August 2019, prior to the pandemic.
• And despite elevated worker absenteeism due to influenza, rising Covid-19 cases and flooding on Australia’s East Coast, hours worked by Aussies fell less than 0.1 per cent in June. Hours worked in Queensland (down 1.5 per cent) and Tasmania (down 1.4 per cent) fell the most, but hours worked in South Australia jumped 1.4 per cent with NSW hours worked 1.0 per cent higher.
• Most jobs were added in Victoria (up 28,500) in June, followed by NSW (up 25,700) and Queensland (up 13,400). The jobless rates in Victoria (3.2 per cent) and NSW (3.3 per cent) were the lowest recorded since February 1978.
• The overall reduction in Australia’s labour market slack is further evidenced by the multi-decade low underutilisation rate. In fact, the underutilisation rate was steady at a 40-year low of 9.6 per cent in June (lowest since April 1982). The underemployment rate, however, rose from a 14-year low of 5.7 per cent to 6.1 per cent in June.
• Forward-looking indicators of labour demand remain incredibly strong, outpacing the supply of workers. As mentioned above, the ABS’ measure of job vacancies hit a record high 480,100 available positions in May. The National Skills Commission’s job vacancy gauge recorded 303,434 available positions in June, the highest level in 14 years (since April 2008). And ANZ reported 243,523 job ads in June, surpassing its recent peak.
• The tight labour market is expected to lead to an increase in wages growth. The NAB’s business survey showed that labour costs grew by a record 3.6 per cent in quarterly terms in June. And the Fair Work Commission’s recent decision to increase the minimum wage by 5.2 per cent and award wages by at least 4.6 per cent portends upside risk to pay packets over the next 6-12 months. Commonwealth Bank (CBA) Group economists expect the annual growth rate of the wage price index (WPI) to lift from 2.4 per cent in the March quarter of 2022 to 3.25 per cent in early 2023.
• The near-term prospects for the job market remain intact, despite rising interest rates, and weaker consumer and business confidence. That said, online job search engine SEEK today reported that its measure of job ads fell by 2.1 per cent in June, with applications per job down 4.6 per cent. It was the first month since April 2020 that all states and territories recorded a drop in job ads. And the reopening of Australia’s international border has fuelled growth in the working-age population, with the expected return of foreign workers helping to increase worker supply.
• Nevertheless, labour market indicators remain resilient, and we expect further tightening of the labour force over the next few months. Due to the size of the upside surprise, our Reserve Bank (RBA) interest rate call is under review.  The RBA Board will be looking at today’s labour force survey as well as the June quarter inflation print (released on July 27) as it prepares to update its set of forecasts for the August Board meeting (August 2) and for release in the Statement on Monetary Policy (August 5).
• On the government policy front, Prime Minister Anthony Albanese and Treasurer Jim Chalmers have announced a jobs and skills summit to be held in early September, which has the potential to drive significant labour market reforms. Australia’s skilled labour crisis is worsening, with businesses struggling to fill jobs amid a mismatch between people’s expertise and the work available across the nation. In our view, increased investment in education and training, enhanced workforce participation and a sustainable skilled migration program is required to address chronic worker shortages.

Originally published by CommSec