Unemployment steady, full-time jobs rebound, but is the economy as good as it looks?

Updated

A surge in full-time employment over the past five months has raised optimism about the economy's health, but is that positivity misplaced?

Key points: Unemployment rate equal lowest since March 2013

Economist hails best full-time jobs growth since 1988

ABS and experts say full-time employment still less common than it was a decade ago

Analysts are divided — some see Australia's struggling economy finally turning a corner, others point to near-record underemployment that is severely restricting wage growth.

Currency markets reflected the conundrum, with the dollar almost busting the 80 US cent barrier for the first time in two years — peaking at 79.89 US cents — before dropping back down below where it started the day.

Today's headline numbers could not be much closer to economist expectations, with 14,000 jobs added and June's unemployment rate steady on an upwardly revised May figure of 5.6 per cent.

The one big surprise, however, was that 62,000 full-time jobs were added, while 48,000 part-time jobs were lost.

This was reflected in a 0.5 per cent increase in hours worked last month.

ABS chief economist Bruce Hockman said this continues a recent trend back towards full-time jobs.

"Full-time employment has increased by around 187,000 persons since September 2016, with particular strength over the past five months, averaging around 30,000 persons per month," he wrote in the report.

CommSec's chief economist Craig James said it is a result that should cause Australians "to fret less and celebrate more".

"Over the past two months, 115,400 full-time jobs have been created – the biggest back-to-back job gain in 29 years," he wrote in a note on the data.

"Annual growth in the number of hours worked is the strongest for over seven years."

However, the recent improvement has not been enough to offset a longer-term trend towards part-time work.

"Full-time employment now accounts for about 68 per cent of employment, however this is down from around 72 per cent a decade ago."

Australia's part-time workforce keeping wage rises low

Dr Jim Stanford from The Australia Institute's Centre for Future Work told ABC News that Australia has the third highest proportion of part-time workers in the industrialised world.

He said many of these workers are "underemployed" and would like more hours.

"Overall underemployment is 9.3 per cent of all employed workers," Dr Stanford said.

"Most of those, of course, are part-time. So about one in three part-time workers wants more hours."

Underemployment is considerably higher for women than it is for men.

According to the Centre for Future Work, underemployment is highest in:

Accommodation and food service (20.1 per cent)

Arts and recreation services (16.5 per cent)

Retail trade (16.1 per cent)

Administration and support services (12.9 per cent)

Health care and social services (10.8 per cent)

Specifically, sales workers (19.1 per cent), labourers (18.4 per cent), and community and personal service workers (17.1 per cent) have the highest rates of underemployment by occupation.

Managers (2.3 per cent) and professionals (5.7 per cent) have some of the lowest rates.

Dr Stanford said the ABS question around wanting more work is quite restrictive - for example, you must not only want more hours but also be available to work them immediately.

That means the underemployment rate may be much higher.

"Other data sources, like the Roy Morgan survey, ask the question more broadly, and they suggest over half of part-time workers want more hours," Dr Stanford added.

Other economists agree that there is a lot more "slack" in the labour market than suggested by the headline 5.6 per cent unemployment rate.

The negative being that those with jobs will continue to face competitive pressure from those without, keeping pay rises low, but the upside for borrowers being that the Reserve Bank will be under little pressure to lift interest rates.

"Despite this latest improvement, there is still plenty of excess capacity in the labour market, which will keep a lid on wage growth," said Kate Hickey from Capital Economics.

"As such, we expect that interest rates will remain on hold until 2019."



Topics: economic-trends, unemployment, work, money-and-monetary-policy, australia

First posted