The Reserve Bank cut interest rates in June and July on fears that unemployment was set to rise. Those fears appear to be coming to fruition, with latest figures showing unemployment rising to 5.3 per cent in July. Yet earnings growth has picked up somewhat.
Releasing its figures for July 2019 today (Thursday, 15 August), the Australian Bureau of Statistics (ABS) said that trend unemployment ticked up to hit 5.3 per cent, from the 5.2 per cent level recorded in June.
At 5.3 per cent, the unemployment rate is exactly where it was 12 months ago, according to ABS chief economist Bruce Hockman.
That is a marked U-turn from the beginning of 2019, when unemployment bottomed out at 5.0 per cent, before steadily climbing again throughout the year.
Underemployment remained steady in July at 8.4 per cent — again level with the same reading in July last year.
Also on the rise was the participation rate, the number of people actively in or looking for paid work.
“The trend participation rate increased further to 66.1 per cent, while employment growth continues to show strength,” Mr Hockman said.
Jobs growth actually outpacing long-term average
It wasn’t all bad news for the economy, however.
The ABS said that trend employment increased by 24,600 for the month, with around two-thirds of these being full-time jobs (15,100 full-time positions versus 9,600 part-time ones).
That brought trend employment for the past year up by 339,200, or 2.7 per cent — above the 20-year average of 2.0 per cent.
Trend underutilisation actually decreased slightly (down by 0.1 of a percentage point) over the past year.
Mixed results state by state
Most states and territories saw the unemployment rate remain steady in July, the ABS said.
The change was driven by a 0.2 of a percentage point spike in South Australia and an increase of 0.1 of a percentage point in both Queensland and the Northern Territory.
All three have higher unemployment than they did 12 months ago, as does Tasmania. In the ACT and the other states, unemployment is lower now than at the same time last year.
Average earnings show upward momentum
Other data from the ABS showed a “pick-up in average earnings growth”, Mr Hockman said.
After what he said was a period of low growth in weekly earnings — at least in part driven by higher numbers of people working in lower-paid jobs, such as in aged and disability care and the services sector — ordinary earnings reached $1,634 in trend terms in May 2019 (the most recent month for which data is available).
That represents an increase of 1.7 per cent or $27 over the previous six months, but a 3 per cent rise or $48 over the past year.
Weekly earnings remain highest in the ACT at an average of $1,811, followed by Western Australia at $1,780. Tasmania had the lowest earnings at $1,420.
Over the past five years, the ABS said earnings growth had been strongest in the Northern Territory, up by 18.1 per cent, and Victoria, up by 16.0 per cent.
Nationally, average weekly earnings have increased by 12.3 per cent over the last five years.
The Reserve Bank delivered back-to-back interest rate cuts in June and July in a bid to shore up Australia’s economy, highlighting the prospect of higher unemployment as one of the driving forces for its decision.
At its July meeting, the RBA board said that employment growth being recorded is failing to address “spare capacity” in the labour market.
Members said that rather than addressing unemployment, Australia’s participation rate has continued to reach new record highs, meaning that more people are staying in the workforce, rather than new jobs being taken up by people who had been unemployed.
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