Jobs strength adds to rates pressure

The labour market didn’t get the memo about growing fears of a slowdown because of rising interest rates, rising costs, especially for petrol, weakening consumer spending – 61,000 new jobs were found last month and the jobless rate remained at 3.9%, a 48-year low.

But the Reserve bank. which sends out the memo (as Governor Phil Lowe did in the surprise ABC TV interview on Tuesday night) will have understood the data, so the odds of another 0.50% rate rise on July 2 have shortened, with some punters putting a saver on a Fed-following 0.75% lift.

But economists think that’s an unlikely size for a local rise, as the AMP’s chief economist, Shane Oliver explained on Thursday: “

“While the move by the Fed to hike by 0.75% at its June meeting suggests a risk that the RBA may do the same as it faces similar pressures to the US, we lean to the view that that will be avoided in Australia given that the RBA meets monthly whereas the Fed meets 6 weekly and so the RBA does not need to hike as much as the Fed at each meeting to achieve the same over a 3 month period and inflation and wages pressures are a bit less in Australia than they are in the US.”

The Australian Bureau of Statistics data though shows how May was a month for new highs for the labour market.

The number of people employed rose to a new all-time high of 13.51 million and the employment to population ratio increased to 64.1% in May, an all-time high and 1.6 percentage points higher than March 2020, which just before the full hit of the first pandemic wave was felt.

With increases in both employment (61,000 people) and unemployment (7,800 people to 548,000) in May, the participation rate increased by 0.3 percentage points to 66.7%, another new record high.

The ABS’s head of labour statistics, Bjorn Jarvis, pointed out that “For the first time ever, more than two out of three Australians aged 15 and over were participating in the labour force,” Mr Jarvis said.

“This was also a record high for people aged between 15 and 64 years, where it was more than four out of five people (80.6 per cent) in May.”

The youth participation rate (those aged between 15 and 24 years) increased by 1.0 percentage points to 71.9 per cent, the highest since October 1996.

Underemployment fell to 5.7% taking labour underutilisation down to 9.6% which is its lowest since 1982.

May’s jobs surge came after the sedate 4,000 rise in April when there were dislocations like Easter, the continuing impact of heavy rain and floods in some parts of eastern Australia and Covid infections (Omicron).

“The increase in May 2022 was the seventh consecutive increase in employment, following the easing of lockdown restrictions in late 2021. Average employment growth over the past three months (30,000) continues to be stronger than the pre-pandemic trend of around 20,000 people per month,” Mr Jarvis said.

Seasonally adjusted hours worked increased by 0.9% in May, following a 1.3% increase in April

“In addition to the continuing trend of increasing employment, we have continued to see relatively stronger growth in hours worked. This is something we also saw this time last year, before the Delta outbreak,” Mr Jarvis said.

Other data in the report shows the strength of the labour market through the two years or so of the pandemic.

The ABS said that employment was 508,600 people (or 3.9%) above the March, 2020 level.

The 3.9% unemployment rate was 1.3 percentage points below the March 2020 level, while the number of unemployed people was 171,200 lower than March 2020.

Over the 12 months from May 2021, the jobless rate has fallen from 5.1%, the number of unemployed people has fallen 155,000, the number of employed people is up more than 386,000 people (or a rise of 2.9%) and the participation rate has improved 0.5%.