Australian labour market: A disappointing rise in the unemployment rate - ANZ

In view of the Felicity Emmett, Senior Economist at ANZ, Australia’s February labour market report disappointed, with a fall of 6.4k jobs and a rise in the unemployment rate to 5.9%.

Key Quotes

“The detail was slightly more positive than the headline with full-time jobs rebounding after the previous month’s sharp fall. The weakness in the report is at odds with still solid business conditions and ongoing gains in ANZ job ads, and in our view some improvement is likely over coming months.”

“The labour market was surprisingly weak in February with a 6.4k fall in employment and a rise in the unemployment rate from 5.7% to 5.9%. While full-time jobs rose 27k (after a large fall in January), this was more than offset by a 33k drop in part-time jobs.”

“The lift in the unemployment rate was particularly disappointing. It had been tracking broadly around 5¾% for nearly a year, but is now at its highest level since January 2016. With underemployment still stubbornly high, this suggests that there is still significant spare capacity in the labour market which is likely to continue to weigh on wage growth for some time.”

“In terms of the states, unemployment rates are trending higher in the three east-coast mainland states, while Western Australia’s unemployment rate looks to be stabilising at around 6½%. Tasmania is a standout performer, with the unemployment rate down below 6% after briefly edging above 7% in mid-2016.”

“RBA implications: The soft tone to the February report provides further confirmation for our view that the RBA is likely to be on hold for an extended period. Spare capacity in the labour market is taking longer than expected to be worked off, and is weighing on wages growth and pushing out the return of inflation into the target band. Today’s numbers highlight that domestic inflationary pressures are likely to remain soft for some time.”