Economy Strong Enough To Absorb Bulk Of Labour Force Entrants

Australia’s labour market remained tight in June and Q2, and apart from the uptick in the unemployment rate, showed little easing. While the number of unemployed rose in Q2, quarterly employment growth was only down slightly so that 80% of the increase in the labour force found a job. Given the stage in the cycle and restrictive monetary policy, this is a strong result. In addition, hours worked rose in Q2 driving underemployment down and the participation rate is close to highs. Strong Q2 increases the risk of an August hike if Q2 CPI prints at 1% or above.

• The June unemployment rate ticked up to 4.05% from 4.00% leaving Q2 only 0.1pp higher than Q1 due to a 32.5k increase in unemployed. The labour force grew by 158.3k in Q2 while there were 125.8k new jobs (Q1 +128.3k). Without the increase in labour supply from immigration, it is likely that the unemployment rate would have remained under 4% this year.

Source: MNI - Market News/ABS

• The NAB business survey is pointing to a sharp reduction in labour demand though, but the jobs data is yet to reflect this.
• June employment printed higher than expected at 50.2k after 39.5k with full-time (FT) driving the increase at +43.3k compared with part-time (PT) +6.8k. Employment growth is now at 2.8% y/y with 3-month momentum 3.3% annualized. PT momentum had been outpacing FT earlier in the year but they are now in line suggesting that employers are feeling more confident about the economic outlook.
• Hours worked rose 0.8% m/m in June to be up 1.4% y/y and Q2 saw a rise of 1.6% q/q after 0.2% in Q1. FT hours momentum outpaced PT in May/June. The quarterly result is likely to weigh on Q2 productivity growth when it is published on September 4. June hours were lower due to illness and increased annual leave.

Source: MNI - Market News/ABS