Is The Drop In Australian Unemployment Rate A Good Sign For Economy?

The December employment report offers a potential upside to market analysts in the light of the downward revision by market’s leading economist, Capital Economics, in the Aussie exchange rate against the greenback.

Capital Economics anticipates the Australian dollar rate sliding to USD 0.60 in 2019 as compared to the previous projection of USD 0.65.

Meanwhile, the Australian economy has reported strongest job figures in seven years with reduced unemployment levels. As per the official stats released by the Australian Bureau of Statistics, the unemployment rate slipped to 5 percent for the month of December with 216k jobs creation. The additional job creation seems to provide relief to Australia’s debt-ridden household sector with record low saving rate.

Victoria’s unemployment rate edged down to 4.2%, the lowest figure for the first time since 1978 when ABS started measuring jobless rate in the country. The jobless rate slipped to 4.3% in NSW, the lowest level over more than a decade since the world’s economic recession. Both the states witnessed a significant drop in female’s jobless numbers as compared to men.

Victoria and NSW have accounted for the majority of the job creation over past one year, at 44% and 35%, respectively.

However, there is a hidden downside to the impressive job numbers. Australia has witnessed over 40% drop in full-time jobs over last one year in comparison to the record-breaking performance of 2017. The national full-time job numbers saw a decline of 4.2% with the elevate under-utilization rate at 13.3%.

The employment number has shown signs of softness in other major cities of the country. Western Australia has experienced nation’s highest jobless rate of 6.3%, followed by 6.1% in Queensland and 5.9% in Tasmania and South Australia.

With the wage price index at 3.6 percent, the wage growth rate is reported at 2.2% only. Brendan O'Connor, Labor jobs spokesman, stated that low wages growth coupled with the higher level of under-employment tends to put sustained pressure on the household sector. The increased job insecurity is putting a strain on Australians to maintain their cost of living.

However, Jobs Minister Kelly O'Dwyer stated that the overall tight jobs market would eventually pass on to strong wages growth.

AMP Capital chief economist Shane Oliver is of the opinion that it was mainly part-time jobs that provided much of the support to job numbers. He further added that the annual employment growth has softened out with labour market slack putting an ongoing pressure on wages growth.

On the contrary, HSBC senior economist Paul Bloxham, saw a positive picture in the ABS employment data release, with positive indicators such as record number of job vacancies as a proportion of the workforce and the latest reading of hiring goals from the business and consumer sentiment surveys.

Whether the improved jobless situation of the nation is supported by employment growth and wages hike is yet to be seen in the near future.


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