(Bloomberg) -- Australian employment jumped by more than twice economists’ estimates in August as a key indicator of potential faster wage growth dropped to a five-year low.
Underutilization -- a sum of unemployment and underemployment which provides a better insight into the labor market’s overall health -- fell to 13.4 percent, the lowest level since June 2013, the statistics bureau said in Sydney. The central bank has kept interest rates at a record low to drive investment and hiring to such a point that employers are forced to offer higher wages.
- Jobs rose 44,000 from July; economists forecast 18,000 gain
- Unemployment rate was 5.3%; estimate 5.3%
- Full-time jobs climbed 33,700; part-time employment rose 10,200
- Participation rate gained to 65.7%; economists predicted 65.6%
- Underemployment fell 0.3 percentage point to 8.1%
- Aussie dollar bought 71.85 U.S. cents at 12:31 p.m. in Sydney from 71.78 pre-data
“August was an outstanding month for the Australian labor market,” said economist Callam Pickering of global jobs site Indeed, who previously worked at the Reserve Bank. “The underutilization measure is more highly correlated to wage growth than the traditional unemployment rate. So this development is a welcome one for future wage growth. Although we still have a long way to go.”
The RBA is struggling for inflation drivers as the government tries to push down power prices ahead of an election and tobacco excise rises come to an end; that leaves wages as the best option to fuel consumer-price growth and set the stage for the first interest-rate increase since 2010.
Australia’s jobless rate -- a key metric for the Reserve Bank -- has ground lower this year, even as hiring eased from the red-hot pace of 2017. Economic growth jumped to a six-year high in the second quarter and policy makers hope record-low interest rates will keep driving that rapid expansion to tighten the labor market and help rekindle inflation. That would potentially clear the path for the first rate hike since 2010, though traders see little prospect of a move in the next 12 months.
“From a Reserve Bank perspective, they will view this as an extremely positive jobs report,” Pickering said. “It probably doesn’t change the near-term likelihood of a rate hike but it certainly points to an economy that is heading in the right direction.”
Other Details:
- New South Wales, the most populous state, added 43,200 jobs and its unemployment rate fell to 4.7% from 4.9%; the northeastern state of Queensland added 11,900 positions
- The rustbelt state of South Australia shed the most positions, down 8,400; unemployment rose the most in the mining hub of Western Australia, to 6.4% from 6%