Today the Australian Bureau of Statistics released another jobs report that significantly beat economists’ expectations. Employment rose nearly 35,000 places in net terms last month, more than double the consensus forecast of 15,000. There was roughly an even split between the gains for full timers and those in part-time roles.
Today’s surprise on employment follows the upwardly revised 64,000 jobs added in November, and takes annual job growth to a very healthy 3.3%oya. In fact, this is the fastest rate of expansion since 2008, just before the onset of the GFC. Over 400,000 jobs were added in all of 2017, three quarters of them full time.
Total employment now has risen for 15 consecutive months, the longest stretch of uninterrupted expansion since the upswing from Australia’s last recession in the 1990s. And, leading indicators of employment point to further improvements. This strengthening trend is in line with the views of company directors in the AICD Director Sentiment Index: Second Half 2017. That survey showed that managers expected to hire more staff and, importantly, lift wages growth.
The only downside to today’s report was that the jobless rate lifted a touch to 5.5%, from a four-year low of 5.4% in November. This mainly reflected, however, more people seeking work, which usually is a sign of improving underlying labour market conditions. Indeed, people seek jobs only when they have a reasonable expectation they will find work, so it follows that the participation rate (which now is the highest since 2011) rises broadly in line with employment. The level of under-employment remains a problem, but that rate is also falling.
Of the states, New South Wales had the lowest unemployment rate at 4.8% (albeit up from 4.6% in November), followed by Western Australia at 5.7% (down sharply from 6.6% the month before). Victoria and Tasmania had the highest jobless rates in December at 6.1%, both up sharply over the month. The ACT retained the lowest jobless rate of all regions at just 3.7%, down from 3.9% in November.
One takeaway for directors is that previously anxious households seem to be responding to the improving conditions in the physical labour market, even if faster wages growth remains elusive. Indeed, yesterday’s Westpac-Melbourne Institute Consumer Sentiment reading for January rose for the second straight month to a four-year high, with optimists again outnumbering pessimists. This supports our assertion last week that physical jobs growth, which has been booming, matters more to households than the sluggish, sub-inflation, rate of wages growth.