Originally published by AMP Capital
- Employment rose by 5,600 in September, well below expectations of 15,000 although some moderation was expected after a strong prints in July and August
- The unemployment rate dropped to 5.0%, helped by a decline in the participation rate from 65.7% in August to 65.4% in September
- Annual jobs growth remains healthy at 2.3%, with the balance continuing to shift from part-time to full-time employment
- Annual growth in hours worked held steady at 2.1% in September
Whilst jobs growth in September was low, the decline in part-time employment in favour of a 20,300 increase in full-time employment is a positive as total hours worked grew 0.4% in September, up 2.1% year on year.
Following a steady decline after the strong employment gains seen in 2017, our Jobs Leading Indicator – based on job vacancies, job ads and hiring plans - points to employment growth stabilising in the coming months.
The rather odd fall in the participation rate in September suggests the 0.3% fall in the unemployment rate to 5.0% is unlikely to be sustained in October. As a result the amount of slack in the Australian labour market is likely to remain in stark contrast to the US, where the underutilisation rate is approaching multi-decade lows, suggesting a significant acceleration in wage increases in Australia is still a fair way off.
Implications
Continued growth in total hours worked and the fall in the unemployment rate will benefit consumers through higher aggregate household income, as well as boosting consumer sentiment. However, the large amount of labour market slack means wage inflation pressures will remain weak. Whilst we expect wage pressures to pick up gradually, the Australian consumer continues to face considerable headwinds due to the ongoing housing market correction and a savings rate that is already extremely low. All this means the RBA looks set to leave interest rates on hold till at least 2020.