Jobless rate falls to 6-year lows of 5 per centNSW & Victoria jobless rates fall to decade lowsLabour force
Employment rose by 5,600 in September after a revised 44,600 increase in jobs in August (previously reported as a 44,000 increase in jobs). Full-time jobs rose by 20,300, but part-time jobs fell by 14,700. Economists had tipped an increase in total jobs of around 15,000.
Hours worked rose by 0.4 per cent in September and lifted by 1.9 per cent over the year. Trend hours worked rose by 0.2 per cent in September and lifted by 1.8 per cent over the year.
The unemployment rate fell to six-year lows of 5.0 per cent in September, down from 5.3 cent in August. In trend terms the jobless rate was steady at 5.2 per cent – the lowest since April 2012. The participation rate fell from 65.7 per cent to 65.4 per cent (seasonally adjusted). Trend participation was steady at 65.6 per cent. 
Other monthly unemployment measures: The underemployment rate was steady at 3½-year lows of 8.3 per cent (seasonally adjusted) in September and the underutilisation decreased by 0.2 percentage points to 4½-year lows of 13.3 per cent (seasonally adjusted).
Unemployment across states in September: NSW 4.4 per cent (August 4.6 per cent); Victoria 4.5 per cent (4.7 per cent); Queensland 6.0 per cent (6.3 per cent); South Australia 5.5 per cent (5.7 per cent); Western Australia 6.0 per cent (6.4 per cent); Tasmania 5.8 per cent (5.8 per cent). In trend terms, Northern Territory 4.1 per cent (4.0 per cent); ACT 3.6 per cent (3.7 per cent). The NSW unemployment rate was at ten-year lows and the Victorian unemployment rate is the lowest in almost ten years.
Youth jobless: In trend terms the unemployment rate for 15-24 year old persons hit a 7-year low of 11.2 per cent. But the jobless rate for 15-19 year old persons rose by 0.2 per cent to 16.5 per cent. A raft of companies is affected by the employment data but especially those dependent on consumer spending. Amongst stocks affected are Fairfax, West Australian Newspapers, Seek Limited, McMillan Shakespeare and Skilled Group.
What does it all mean?
The hiring spree in Australia continues. Labour market conditions are positive. Employment growth is solid, the unemployment rate is at six-year lows, job vacancies are elevated and the participation rate has been hovering near record high levels. And while home prices have moderated in Greater Sydney and Melbourne, the unemployment rates in both cities are at near ten-year (4.4 per cent) and six-year (5.5 per cent) lows in August (detailed regional data is released later), respectively. And the unemployment rates of NSW andVictoria have fallen to decade lows of 4.4-4.5 per cent in September.
Further jobs gains are anticipated. The Aussie domestic economic backdrop is supportive. And leading indicators of employment are elevated. In fact, the 12-month moving average of the NAB’s employment conditions index within its business survey strengthened in September and is at record highs.
And the Bureau of Statistics’ measure of job vacancies lifted to a record high of 238,200 in the three months to August. That said, there has been some divergence between the job advertisements data from ANZ and SEEK, which have both moderated from their most recent peaks in April-May, explained in part by the use of social media sites, such as LinkedIn.
While the labour market is expected to gradually tighten, strong population growth, rising part-time work and record participation from females and older workers is keeping the unemployment rate ‘sticky’ at around 5.0-5.5 per cent, slightly above the Reserve Bank’s estimates of full employment (or non-accelerating inflation rate of unemployment, “NAIRU”) at five per cent. With more Aussies seeking to work longer hours or days a week, particularly if casually employed, spare capacity in the labour market has kept wages growth subdued.
And as highlighted by Reserve Bank Deputy Governor Guy Debelle yesterday in his speech entitled “The State of the Labour Market” the central bank’s liaison contacts has found that labour market turnover has been low and employers have cleverly retained workers through non-salaried means – flexible work arrangements, bonuses, share schemes and other entitlements.
But labour turnover is expected to increase, skills shortages are emerging in some industries (i.e. mining engineers, information technology and project workers) and the recent lift in the minimum wage will boost the pay packets of around 25 per cent of all Aussie workers. Only a gradual increase in wages is expected as spare capacity is eroded, but better job security is supportive of household consumption.
What do the figures show?
Employment rose by 5,600 in September after a revised 44,600 increase in jobs in August (previously reported as a 44,000 increase in jobs). Full-time jobs rose by 20,300, but part-time jobs fell by 14,700. Economists had tipped an increase in total jobs of around 15,000.
Annual job growth stands at 2.3 per cent (decade average 1.6 per cent).
Hours worked rose by 0.4 per cent in September and lifted by 1.9 per cent over the year. Trend hours worked rose by 0.2 per cent in September and lifted by 1.8 per cent over the year.
The unemployment rate fell to six-year lows of 5.0 per cent in September, down from 5.3 cent in August. In trend terms the jobless rate was steady at 5.2 per cent – lowest since April 2012. But the participation rate fell from 65.7 per cent to 65.4 per cent – the lowest level in 11 months.
Unemployment across states in September: NSW 4.4 per cent (August 4.6 per cent); Victoria 4.5 per cent (4.7 per cent); Queensland 6.0 per cent (6.3 per cent); South Australia 5.5 per cent (5.7 per cent); Western Australia 6.0 per cent (6.4 per cent); Tasmania 5.8 per cent (5.8 per cent). In trend terms, Northern Territory 4.1 per cent (4.0 per cent); ACT 3.6 per cent (3.7 per cent). The NSW unemployment rate was at ten-year lows and the Victorian unemployment rate is the lowest in almost ten years.
State/territory jobs: In seasonally adjusted terms, the largest increase in employment was in Victoria (up 20,000 persons), followed by Western Australia (up 3,100 persons) and New South Wales (up 2,800 persons). The largest decrease was in Queensland (down 11,600 persons). In trend terms jobs in Northern Territory rose by 800 and ACT jobs rose by 200.
The working age population rose by 25,600 in September to 20.33 million. Over the year the working age population rose by 319,400 or 1.60 per cent, down from the record 2.36 per cent annual growth in December 2008.
The underemployment rate was steady at 3½-year lows of 8.3 per cent (seasonally adjusted) in September and the underutilisation decreased by 0.2 percentage points to 4½-year lows of 13.3 per cent (seasonally adjusted).
In trend terms the unemployment rate for 15-24 year old persons hit a 7-year low of 11.2 per cent. But the jobless rate for 15-19 year old persons rose by 0.2 per cent to 16.5 per cent.
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 non-private 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 market continues to tighten. Over 280,000 jobs have been created over the past 12 months. While a fall in the participation rate and sampling rotation by the Bureau of Statistics helped push the unemployment rate down, labour market conditions are solid given the healthy increases in full-time jobs.
And if you use the Reserve Bank’s estimate of “full employment” at five per cent that goal has been reached. NSW and Victoria’s unemployment rates are at decade lows at 4.4-4.5 per cent on the back of the creation of 134,200 and 85,500 jobs, respectively. Unemployment rates are even lower in the Territories.
But the underemployment rate, while heading in the right direction, remains elevated at 8.3 per cent. Clearly the unemployment rate – the key driver of underemployment – has to fall beyond 5 per cent to erode spare capacity in the labour market sufficient to boost workers’ pay and ultimately inflation. Nevertheless, gradual progress is being made and households will be grateful for better job security.
CommSec expects official interest rates to remain on hold until late 2019.
Published by Ryan Felsman, Senior Economist, CommSec