Australia likely to witness further falls in unemployment rate over near-term, says ANZ Research

The ANZ labor market indicator points to further falls in the unemployment rate. Rising employment will support household income, but as yesterday’s weak Wage Price Index shows the reduction in spare capacity in the labor market is not yet feeding into stronger wages growth.

The labor market is clearly in better shape than it has been for some time, with a further gain in employment and another fall in the unemployment rate in October. Employment rose a modest 3.7k in October, following an upwardly revised gain of 27k in September (previously +20k). This continues the long run of monthly employment gains: this is the 13th straight monthly gain in jobs, the longest uninterrupted stretch since 1994 when the economy was dragging itself out of the very deep recession of the early 1990s.

Full-time employment was strong with a rise of 24k against a fall of 21k in part-time jobs. This helped to drive another rise in hours worked (+0.3 percent m/m), which are now up 3.2 percent from October last year.

Importantly, the unemployment rate continues to edge lower, falling from 5.5 percent in September to 5.4 percent in October. This is a welcome development, with the gradual reduction of spare capacity likely to eventually put pressure on wage growth.

"We expect the expansion in jobs growth to continue (albeit at a more moderate pace) over the near term given the solid prospects for economic growth. Further inroads into unemployment will evidently be required before we see a meaningful acceleration in wages," ANZ Research commented in its latest report.

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