Australia unemployment rate falls to 5.5%

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Australia unemployment rate falls

Summary:

  • Australia unemployment rate falls to 5.5% in January 2018
  • Australian economy adds 16,000 jobs during the month
  • A decline in full-time jobs that was offset by an increase in part-time jobs
  • Wage growth continues to remain weak

The Australian labour market conditions showed signs of strengthening in the New Year as the economy were adding more jobs than expected while the unemployment rate edged lower, overall the australia unemployment rate falls.

However, most of the gains in the employment were driven by an increase in part-time jobs which managed to offset the decline in full-time jobs.

Data from the Australian Bureau of Statistics showed that the Australian labor market continued to expand for sixteen consecutive months. The economy was seen adding 16,000 jobs during the month while the number of people looking for work fell as the participation rate fell to 65.5%.

Full time jobs were seen falling 49,800 during the month. However, the decline was not alarming as there was a strong increase in the full time jobs during the previous months. Part-time jobs were seen rising 66,000.

The decline in the participation rate was a bit concerning for economists as it is expected to signal a pause to the strong trend in the rise of full-time jobs. However, economists are not reading much into a one-time report for the moment.

The number of hours worked was seen falling 1.4% while the annual rate of change fell to a 0.5% increase. This was lower than the 3.2% increase that was seen previously.

The Australian unemployment rate was seen falling from 5.6% in December 2017 to 5.5% in January 2018. The December’s unemployment rate was revised higher. Overall, the unemployment rate was seen holding steady within the 5.4% and 5.6% band for the past nine months.

 

Australia unemployment rate falls 1
Australia Unemployment Rate: 5.5%, Jan 2018 (Source: Tradingeconomics.com)

 

According to the Reserve Bank of Australia, the full time employment target is set to 5.0%. Based on the data from the month of January, the Australian labour market is expected to still have some spare capacity left.

The improvement in the labor market comes amid a surge in business conditions and profit. But on the other hand, most businesses were seen to be reluctant to raise wages on fears of intense competition.

Earlier in the week, a report from Westpac showed that the consumer confidence remained stable for February but expanded at a small pace. The consumer confidence index data from Westpac, based on a survey showed that the index registered a print of 203.7 for the month of February. This was a 2.3% decline from the month of January.

A reading in the survey index above 100, signals a rising consumer confidence in the Australian economy.

The fact that wage growth was not rising was also evident from the fact that earlier I the week, Luci Ellis, the assistant governor of the RBA said that although there were signs of a tightening of the labour market, companies were reluctant to hike wages for fear of increasing the price of finished goods.

Speaking about the RBA’s full employment level of 5.0%, the RBA assistant governor said that “But we are mindful that, as we approach that figure, there is a risk we find there is more room to come down before wage growth picks up in earnest.”

Due to the spare capacity, there were no wage growth or inflation pressures. Despite the upbeat report on employment, the RBA is expected to hold rates steady in the near term. According to the market expectations, the RBA is not expected to hike interest rates until 2019.

The RBA held its first monetary policy meeting few weeks ago where it signaled that the central bank was in no rush to hike interest rates. The central bank said that it expects to wait until there was further evidence of wage growth and inflation pressures building up.

Wage growth, according to the Reserve Bank of Australia is expected to rise only slowly and could remain subdued even after the Australian labor market reaches full employment of 5.0%.

 

 

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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