Australia’s jobless rate unexpectedly dived to its lowest since 2012 last month, but the decline smacked more of statistical noise than a true signal of incipient inflationary pressures and rising interest rates.
Figures from the Australian Bureau of Statistics (ABS) out on Thursday showed the unemployment rate dropped to 5.0 percent in September, when analysts had forecast a steady 5.3 percent.
It was the lowest reading since April 2012 and took unemployment to a level that might be considered a harbinger of accelerating wages and inflation by the Reserve Bank of Australia (RBA), at least theoretically.
The detail, however, was not nearly as strong. Net employment grew just 5,600 in the month, below the 15,000 expected and compared to a 44,600 jump in August.
Instead, the entire fall in unemployment was due to a sharp drop in the number of people actively looking for work. New entrants into the ABS survey had a jobless rate 1.2 percentage points lower than those leaving, biasing down the result.
The ABS’s measure of underemployment, which includes those who want to work more hours, also held steady at 8.3 percent.
“Our message on whether that will trigger much faster wage growth is “don’t hold your breath”,” said Paul Dales, head of Australian economics at Capital Economics.
“Underemployment is still unusually high and the structural forces that have restrained wage growth in all major economies aren’t going to disappear.”
Financial markets also had their doubts, with the Aussie dollar edging just 20 pips higher to $0.7121 and interest rates futures <0#YIB:> showing scant chance of a rate hike for months to come.
The RBA has held rates at 1.5 percent since mid-2016 and has shown no inclination to move anytime soon.
Too many unflled vacancies
Thursday’s report showed annual jobs growth slowed a touch in September to 2.3 percent, though that still outstripped the U.S. pace of job creation.
RBA Deputy Governor Guy Debelle devoted an entire speech this week to the labor market, arguing it was “in pretty good shape.”
One positive development was a rise in the vacancy rate to its highest ever relative to the size of the labor force, a factor often emphasized by policy makers.
Yet this is one area where Australia trails the United States. The ABS measure of job vacancies shows openings are at a record high of 238,200, but that remains well short of the total unemployed at 665,800.
Figures from the U.S. this week showed job openings also hit a record of 7.1 million in September, and that was actually more than the number of people unemployed at 6 million.
Australia also lagged in the number of people voluntarily quitting jobs to seek higher paid employment elsewhere, just one reason why wage growth has disappointed in recent years.
Debelle also noted that while there had been a sharp increase in vacancies in recent years, the unemployment rate had fallen by relatively little.
“That is, firms are hiring fewer workers per job opening or vacancy than has been typical,” he said.
The reason for this sea change were unclear - perhaps skill mismatches or a lack of training - but it was acting to retard the drop in the jobless rate.
