Australia's Jobs Market Keeps Defying Gravity as Hiring Soars
The economy added 41,100 roles from the previous month, with more than three-quarters of them full-time.
(Bloomberg) --
Australia’s labor market surged in July, adding almost three times the forecast number of jobs, while unemployment remained stuck at 5.2% as the workforce swelled to a fresh record.
The economy added 41,100 roles from the previous month, with more than three-quarters of them full-time, the statistics bureau said in Sydney Thursday. Economists had forecast a gain of just 14,000. The participation rate, which wasn’t expected to move, slightly rose to a new high of 66.1%.
“The rebound in employment growth likely reflects the rebound in hiring intentions after the federal election, which temporarily disrupted firms’ hiring plans,” said Sarah Hunter, head of macroeconomics at BIS Oxford Economics in Sydney. “It also highlights that the amount of spare capacity in the market is much larger than previously thought.”
Australia’s center-right government was re-elected in a surprise result in May and last month was probably the earliest the labor market could reflect the outcome. It put an end to opposition plans to scrap housing tax breaks and lift the burden on high income earners. Similarly, the Reserve Bank had cut rates in June and did so again in July, which might also have lifted confidence.
The Aussie dollar rose on the data, buying 67.81 U.S. cents at 3:59 p.m. in Sydney from 67.58 prior to the report’s release.
Lowe’s Dilemma
For RBA chief Philip Lowe, the jobs result prolongs his conundrum. The strength of hiring and swelling participation speak to a healthy labor market, yet the constant increase in job seekers pushes his goal of lowering unemployment ever further away. He estimates the jobless rate needs to come down to near 4.5% to reignite inflation.
“Normally the employment growth we have experienced over the past two years would have led to a sizable decline in the unemployment rate. These are not normal times,” said Callam Pickering, an economist at global jobs website Indeed, who previously worked at the central bank. “High population growth and rising participation has instead put upward pressure on measures of unemployment.”
That’s underscored by the underemployment and underutilization rates both increasing 0.2 percentage point to 8.4% and 13.6% respectively, suggesting stronger wage growth remains a fair way off.
What Bloomberg’s Economists Say
“The lack of headway keeps expectations alive for further rate cuts. Still, we don’t expect any more easing this year from the RBA, as the weaker Australian dollar should help to support exports and fiscal stimulus is in the pipeline.”
-- Tamara Mast Henderson, Economist
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Australia’s job gains were led by Queensland, New South Wales and Victoria, the east coast states that have benefited most from the RBA’s record-low cash rate that helped drive a wave of apartment construction in recent years.
The nation’s labor market has held up surprisingly well even as the economy slowed sharply since mid-2018. One explanation is that much of the hiring is government-related and impervious to prevailing economic conditions.
The RBA’s lowering of the full-employment estimate follows in the footsteps of other developed-world counterparts, who’ve had to wait for their jobless rates to fall to exceptionally low levels to spur wage growth. Markets are predicting the RBA will have to ease further from the current 1% cash rate to keep pushing down unemployment and keep up with a wave of global easing.
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Victoria Batchelor
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