Unemployment Rises In December
The latest labour market readings from Australia showed that the Unemployment rate rose by 0.1% in December to 5.8%, which means the indicator remained roughly unchanged over the course of 2016 and above its full employment level of 5% – 5.25%.
Jobs growth remained firm over the month at 13.5k, beating the market’s expectation of 10k whilst the participation rate also rose by 0.1%.
The unemployment rate has broadly tracked between 5.6% and 5.8% since February 2016. Spare capacity in the labour market has put downside pressure on wage growth and domestic inflation. Over 2017, it seems that a modest tightening of the labour market should provide some support for wage growth.
The recent rise in commodity prices is also expected to feed through, given the historical, strong-positive correlation between commodity prices and unit labour costs. Some stabilization in wage growth should be enough to see the RBA refrain from further cutting and remain on hold over coming quarters.
Data Flash
- Employment rose 13k over December against 10k expected. Jobs growth has averaged 9k p/m over the past 9 months. Annual employment growth sits at 0.8%, up from 0.7% the prior month
- Full-time employment rose 9k over December, down 0.4% from a year ago. Part-time employment rose 4k against the prior month and 3.4% year-over-year.
- The participation rate rose from 64.6% to 64.7% over December. The rate is currently 0.4% below the end-2015 level but did increase 0.3% between October and December 2016.
- The unemployment rate rose to 5.8% from 5.7% the previous month
- The employment-to-population ratio was 60.9%, down from 0.1% from the prior month.
Summary
With Australia’s unemployment rate having tracked roughly sideways over the year, the labour market was left with continued spare capacity. Employment growth slowed after a period of strong growth over 2015 but combined with a lower participation rate; the end result was that the unemployment rate stagnated over 2016.
