Victorian jobless rate hits 19-month high

ACT unemployment is the lowest in 11 years

Labour Force

Employment rose by 13,500 jobs in January – after increasing by 28,700 in December (previously estimated at +28,900). Full-time jobs rose by 46,200, but part-time jobs were down by 32,700. Economists had tipped an increase in total jobs of around 10,000.

The unemployment rate rose from 9-month lows of 5.08 per cent (to two decimal places) in December to 5.29 per cent in January in seasonally adjusted terms. But in trend terms, the jobless rate was steady at 5.2 per cent in January.

Hours worked fell by 0.4 per cent in January, but were up by 0.9 per cent over the year. In trend terms, hours worked were up by 1.3 per cent on the year – the weakest annual growth rate in almost 3 years.

Participation rate: The participation rate rose from 66.0 per cent in December to 66.1 per cent in January in seasonally adjusted terms. In trend terms the participation rate was steady at 66.0 per cent.

Unemployment across states in January: NSW 4.5 per cent (December 4.5 per cent); Victoria 5.4 per cent (4.9 per cent); Queensland 6.3 per cent (5.7 per cent); South Australia 5.7 per cent (6.2 per cent); Western Australia 5.8 per cent (5.4 per cent); Tasmania 5.9 per cent (5.5 per cent). In trend terms, Northern Territory 5.3 per cent (5.3 per cent); ACT 3.0 per cent (3.1 per cent).

The wage data is important for consumer-focussed industries including retailers.

What does it all mean?

• The job market showed amazing resilience in January. An additional 13,500 Aussies entered the workforce. In fact, over the past three months to January, job gains totalled 79,300 – which is all the more impressive given the challenges of bushfires, smoke hazes and the novel coronavirus outbreak – all weighing on the economy. And in the nation’s capital – the ACT jobless rate fell to 11-year lows of 3 per cent.

• That said, the jobless rate edged up from 9-month lows of 5.08 in December to 5.29 per cent in January due primarily to a lift in workforce participation. The number of Aussies either in the workforce or looking for work – participation rate – edged higher to 66.1 per cent. And hours worked fell, perhaps due to the impact of bushfires and smoke haze in south-eastern Australia. In fact, Victoria’s unemployment rate hit 19-month highs of 5.4 per cent in January.

• Commonwealth Bank Group economists estimate that the particularly hard hit NSW, ACT and Victorian bushfire regions – Hume, Capital, Southern Highlands, Shoalhaven and the Hunter Valley – account for around 4 per cent of Australia’s total employment. Within these regions, a large share of workers are employed in retail trade and tourism – around 20 per cent of total jobs. Likely job losses in these areas may be offset by reconstruction work (construction accounts for 9 per cent of total jobs) following the announcement of the Federal Government’s $2 billion Bushfire Recovery Fund. And $76 million has been allocated by the Government to protect tourism jobs.

• Of course, disruption to Australia’s resources, tourism and education sectors from the more recent coronavirus epidemic in China is expected to hit business hiring intentions in the coming months. But there is still room for optimism if recent forward-looking leading indicators of jobs growth are any guide. In January, skilled job vacancies from the Department of Employment lifted by the most in over two years, up by 0.7 per cent. The ANZ job advertisements gauge rose by 3.8 per cent in January – the biggest lift in 7 months. And SEEK job ads grew by 1.6 per cent in January – also pointing to further potential job gains. But SEEK’s Managing Director, Kendra Banks, cautioned, “after Australia’s devastating bushfire season, and the uncertainty surrounding novel coronavirus, we expect short term growth to remain challenging as sectors such as Hospitality and Tourism, Agriculture, Forestry and Fishing, Retail and the Higher Education sector remain exposed.”

• Reserve Bank policy makers remain fixated on the labour market. Job gains in recent months had pushed down the unemployment rate, reducing market expectations for a near term interest rate cut. While labour demand has been solid – helped in part by sluggish wage growth (labour costs) – strengthening workforce participation for both females and older Australians have lifted labour supply. Rising labour force participation has also been supported by rising population growth – increasing spare capacity in the labour market.

• The best representation of ongoing slack in the labour market – trend underemployment and underutilisation rates – remain too high at 8.5 per cent and 13.7 per cent, respectively in January. The lift in the underutilisation rate has coincided with a decline in wage growth over the past five years.

• With only gradual progress expected in achieving the Reserve Bank’s ‘full employment’ target of around 4.5 per cent, Commonwealth Bank Group economists still expect policy makers to cut interest rates in the coming months to support the economy. That said, we acknowledge that there is a strong case for more fiscal stimulus rather than a further easing in monetary policy to stimulate the economy.

Published by Ryan Felsman, Senior Economist, CommSec