The threat of an interest cut from the Reserve Bank has been held at bay for a few more months after a better than expected jobs performance in January that belied the wider gloom about the economy and key sectors such as retailing.
According to figures from the Australian Bureau of Statistics (ABS) the unemployment rate on a trend basis was steady at 5.1% (December’s rate was revised up from 5.0% to 5.1%), while on a seasonally adjusted basis the jobless rate was unchanged at 5.0%.
On the more accurate trend basis, employment rose by 24,900 last month with full-time employment increasing by 16,800 and part-time employment increased by 8,100.
(On a seasonally adjusted basis of 39,100 new jobs created, including 65,400 more people in full-time employment and 26,300 fewer people in part-time employment).
In seasonally adjusted terms, the largest increase in employment in January was in NSW, a 47,200 increase in jobs, followed by Victoria, up 2,200, and Western Australia, up 800 persons. The largest fall was in Queensland, down 19,900 jobs, followed by South Australia, down 4,500.
The ABS said that over the past year trend employment rose by 295,500 (2.4% slightly better than 2.3% in December when 284.100 people gained new jobs) which was above the average annual growth over the past 20 years (2.0%, as it was in December).
The trend employment to population ratio, which shows how employed the population is, rose to a 10 year high of 62.4% and the trend participation rate was steady on 56.7% which is a multi-year high.
That continuing above average job creation will keep the Reserve Bank from cutting rates for a while longer.
Even though the central bank is worried about the impact of weakening house prices on demand, so long as jobs are being created and people remain in work, it will stay a rate cut, unless that annual job creation rate fall to or below 2%.
The RBA will continue to accept slow wage growth in its belief that a very gradual recovery is underway but if job creation suddenly weakens, a rate cut or two will follow very quickly.
Yesterday Westpac’s Chief Economist Bill Evans joined his AMP counterpart, Shane Oliver in forecasting two rate cuts from the RBA by the end of this year to take the cash rate to 1%.
And more evidence yesterday that wage growth remains anemic. Average Weekly Earnings (AWEs) for the six months to November showed a rise of just 2.4%, only a fraction above the 2.3% rise in the Wage Price Index in the December and September quarters. AWEs rose 1.2% in the six months to November, unchanged from the previous six months.
ABS Chief Economist Bruce Hockman said in a release yesterday: “This latest data points to ongoing low growth in average earnings with the annual increase in line with the Wage Price Index data released yesterday. The growth of 1.2 percent for the last six months is the same as it was at May 2018.”
“Over the year, average weekly ordinary time earnings for full-time adults in the private sector increased by 2.3 percent and public sector by 2.6 percent, with the average earnings in the public sector remaining higher than in the private sector,” he said.