Summary
- Australia unemployment rate in August was steady at 5.3%
- Australia adds 44,000 net jobs during the month
- Most of the gains came from full-time positions which increased 33,700
- Jobs data for July was revised lower
- Initial signs of wage growth keep markets excited, but economists believe that it will take a while before price pressures develop
Increase in full-time positions rises strongly
The latest monthly employment report from Australia beat expectations as the unemployment rate held steady.
The increase came as more people joined the labor market in a mix that is likely to put wages subdued although it supports consumer spending.
Data released by the Australian Bureau of Statistics released on Thursday showed that the Australian economy added 44,000 net jobs during August. This beat the expectation of a 15,000 increase.
From the total jobs created, most of the jobs created were full-time jobs. Full-time positions rose 33,700 during the reported month.
The Australian unemployment rate was seen holding steady at 5.3% marking a six-year low.
The data matched the median estimates which called for no change to the national unemployment rate.
Underemployment rate falls to 8.1%
Meanwhile, the underemployment rate which measures those having jobs but wanting to work more hours decreased by 8.1%. Australia’s underemployment rate was at 8.5% during the month before.
The annual pace of increase in jobs rose 2.5%. This was higher even compared to the speed of job creation in the U.S. which is at 1.6%
The jump in the labor market is a welcome sign for the officials at the Reserve Bank of Australia. Policymakers were counting on the fact that the labor market tightness would eventually lift wage growth higher.
Wage growth in Australia is hovering near record lows so far, something which the central bank has been struggling to spark.
The underutilization rate which is a sum of unemployment and underemployment fell 13.4%. This was the lowest level since June 2013, according to data from the ABS.
Wage growth could start to push higher
The Reserve Bank of Australia has been keeping interest rates near record lows to drive investment and hiring to push wage growth higher.
The underutilization rate measure is more correlated to wage growth instead of the main unemployment rate. Economists believe that this is a development that could potentially signal a rise in wages over the coming months.
The labor force participation rate was seen rising to 65.7%. This matched the previously established highs. Revisions to the labor market data for July saw that the net jobs are declining 4,300 as compared to the initial reports of a 3,900 job decline.
Australia GDP rises 3.4% in Q2
The labor market data comes following the GDP report released earlier during the month. Data showed that the Australian economy accelerated at a quick pace of 3.4% in the second quarter.
Household consumption contributed heavily to the GDP, but there was little sign of price pressures.
The lack of price pressures kept the RBA from rising interest rates at its previous meeting. The RBA has been struggling to push inflation higher even as the government is pushing down prices ahead of elections.
Wage growth remains the driver for price pressures. As a result, wage growth could determine the outcome of interest rates. The RBA has been lowering interest rates since 2010 and has kept interest rates steady at 1.5% for nearly two years in a row.
AUD remains bearish
The Australian dollar posted gains on the news, but price action was subdued overall.
Despite a positive jobs report indicating underlying improvements, there was still a long way to go. The AUD briefly fell below a two and half year low this week before pulling back modestly higher.
