Data from the Australian Bureau of Statistics on Thursday showed employment rose 13,500 in January, topping forecasts of an increase of 10,000.
Australia’s unemployment rate eased back unexpectedly in January but that masked a disappointing slump in full-time jobs that augured badly for a much-needed revival in wage growth and inflation. Data from the Australian Bureau of Statistics on Thursday showed employment rose 13,500 in January, topping forecasts of an increase of 10,000. But all of the increase was in part-time work, as full-time jobs fell 44,800 after three months of gains. Since January last year, full-time employment has fallen by 56,100 while part-time employment has climbed by 159,400.
The unemployment rate did dip to 5.7 percent but remained within a tight 5.6-5.8 percent range that has held for the past year, largely because the participation rate has fallen as fewer people looked for work. “The now-familiar problem of new jobs being mostly part-time ones rather than full-time ones reared its ugly head again,” said Paul Dales, chief economist at Capital Economics.
“The high rate of part-time employment and associated rise in underemployment will keep a lid on wage growth and the underlying rate of inflation,” he added. “The labour market won’t generate any major inflationary pressure for a couple of years yet.” The Reserve Bank of Australia (RBA) has highlighted uncertainty over the labour market as a key risk for 2017. A slowdown in hiring might just be one of the few developments alarming enough to justify another cut in interest rates.
Over the past year, Australia has seen a gradual decline in unemployment but underemployment — in which people want more work but can’t get it — has risen to historic highs. Wages growth is already at record lows while inflation is likely to remain below the central bank’s target band of 2-3 percent until next year at least. Still, futures markets <0#YIB:> have all but priced out the chance of another policy easing and instead imply a one-in-four chance that rates might be hiked at the end of the year.
Meanwhile, leading indicators of labour demand have generally been positive. Job advertisements are at a five-year peak while a survey of business conditions in Australia hit a near-decade high in January, with a healthy 5 point rise in employment, pointing to some pick up in the labour market. Thursday’s report also showed an unusually sharp pick up in hours worked which took annual growth in hours to a strong 1.2 percent, and that was despite the drop in full-time jobs.
“So while the total employment was soft in Jan, the lift in hours worked suggests that underlying labour demand remains quite robust,” said Justin Smirk, an economist at Westpac. “As such we expect to see total employment gains to gather some momentum over the next few months.”