Labour Force - The Devil is in the Detail

• On the surface, today’s jobs report was seemingly positive. The unemployment rate fell from 5.6% in April to 5.4% in May, a six-month low. However, looking through monthly volatility, the unemployment rate in trend terms has been steady at 5.5% for ten consecutive months.
• Some of the detail took some shine out of the report. Jobs rose a modest 12.0k in May. The run of a slower job gains since the beginning of the year is continuing after very strong job growth over 2017.  Average job gains over 2018 stood at 12.4k, down from 34.4k over 2017.
• It was a fall in the proportion of job seekers that helped to bring the unemployment rate down in the month. The participation rate fell from 65.6% in April to 65.5% in May. 
• The full-time, part-time breakdown was also less encouraging. Job gains in May were entirely due to an increase in part-time jobs of 32.6k. It was offset by a fall in full-time jobs of 20.6k.
• We continue to expect that the unemployment will fall gradually, but with the current pace of job growth we do not anticipate the unemployment rate will get to 5.0%, the RBA’s estimate of full-employment, for some time. Indeed, there is a risk that the unemployment rate at full-employment is even lower. Consequently, spare capacity is likely to persist within the labour market.  This ongoing spare capacity suggests we are unlikely to see any meaningful pickup in wage growth and inflation, and that the RBA will leave rates on hold for an extended period.

 

Please see the attached report for more information.

Back to News