- Australia jobless rate steady at 5.6 pct in August
- Employment up 54,000 vs 15,000 forecast
- Data lifts A$ briefly to a high of A$0.8017
- Participation rate highest since September 2012
Australia’s jobs blew past expectations to surge the most in two years in August, yet unemployment was static as more people looked for work, limiting upward pressure on wages, inflation and interest rates.
Thursday’s data from the Australian Bureau of Statistics (ABS) showed employment leaped 54,200, the biggest jump since October 2015 and far above the 15,000 increase forecast by economists. That was the 11th straight month of gains, the longest streak in 23 years.
The data will be welcomed by the Reserve Bank of Australia (RBA), yet the surge in jobs is unlikely to convince it to nudge rates higher. “While the strength in the labor market is very positive for momentum in the economy, the outlook is still mixed because price pressures are low,” said Diana Mousina, senior economist at AMP Capital.
“We don’t think that the central bank needs to be raising interest rates. Wages growth is still too low.”
While a blockbuster 269,000 jobs have been created so far this year, the labor force has also expanded by an equally sizable 257,000, keeping the jobless rate steady at 5.6 percent.
Indeed, the participation rate was the highest since September 2012.
That slack in the labor market is likely to keep wages growth near record lows and restrain inflation which is stuck under the RBA’s target band of 2-3 percent.
The RBA slashed interest rates twice last year to a record low 1.50 percent to help stoke inflation. It has since stood pat on policy for over a year and most economists polled by Reuters this month see rates steady over a one-year horizon.
The biggest argument against raising rates is the downbeat consumer sector which is battling record-high mortgage debt and rising living costs at a time when income growth has remained subdued.
Consumer confidence in Australia has slumped in sharp contrast to upbeat business polls.
The divergence between the two is unusual and could well be a stumbling block for Australia’s A$1.7 trillion economy which has had a dream run of 26 years without a recession.
The Australian dollar briefly hopped up 20 ticks on the data to touch a high of $0.8017. It last stood at $0.8003 against a resurgent greenback.
“Stronger employment means more people have money in their pockets, ready to spend,” said Craig James, chief economist at broker CommSec.
“A stronger economy also means higher revenue and profits and clearly that is positive for sharemarket investors and superannuants.”
LOW PAYING JOBS
Thursday’s data showed employment was racing at an annual rate of 2.7 percent in Australia, compared with 1.4 percent in the United States. Over the past six years, annual U.S. jobs growth has not exceeded 2.3 percent.
Part of the story behind sluggish wage growth is that many of the new jobs being created are in service sectors that tend to pay less overall.
ABS does not give a sector-wise break-up of jobs in its monthly series but quarterly data shows health, education, and accommodation all boasted healthy gains in the year to June while services, in general, accounted for two-thirds of all jobs.
One hopeful trend was a marked pickup in hiring within professional services – everything from architects to lawyers – which tend to pay well over the average.
Some 62,000 net new jobs were created in this sector in the year to June, easily the strongest of the 12 industries covered.
Economists say an increase in government spending for infrastructure projects around Australia means more jobs in construction and engineering sectors.