April AU Labour Force Survey: A Wage Problem

The latest set of labour market figures for Australia – comprising the labour force survey and the wage price index – paint a mixed picture of labour market conditions. Participation in the workforce has never been higher, led by stronger participation by women and older Australians, but the unemployment rate continues to drift slowly upwards. Meanwhile, the latest set of wage figures continue a long and disappointing trend.

Employment rose by 13,800 people in April on a trend basis, following average monthly growth of almost 35,000 people last year. Softer growth has mainly been felt through full-time roles. Last year, full-time employment accounted for almost 80% of total employment growth but that has fallen to 40% in the first four months of 2018.

Despite evidence that employment growth has slowed, participation in the labour force has never been higher. It increased to 65.7% in April, beating the previous record established in December 2010. However, a byproduct of higher participation has been a stubbornly high unemployment rate. It has fallen just 0.2 percentage points over the past year and has even ticked a little higher since November.


With labour market slack still quite high, particularly when accounting for broader measures of unemployment, it is little surprise that wage growth remains subdued. Real wage growth – that is wages adjusted for inflation – have barely increased in the past five years and declined outright in the March quarter.

Job seekers have little bargaining power and to some extent soft wage growth may have become ingrained in their expectations. We may not see a material improvement in wage growth until the unemployment rate dips below 5% and unfortunately policymakers don’t expect that to happen in the next three years.


One of the brighter spots, however, was in hours worked. Total hours worked across the Australian economy rose by 3.3% over the past year, the strongest outcome since November 2010, slightly outpacing growth in overall employment. Despite this we expect average hours per person to decline in the future due to higher participation among women and older Australians who place a greater emphasis on workplace flexibility.


Finally, at the state level we may be seeing an emergence of a two-speed labour market. The unemployment rate in New South Wales and Victoria, at 4.9% and 5.3% respectively, sits well below that of the other states. By comparison, the unemployment rate in the two mining states, Queensland and Western Australia jumped to 6.3% and 6.4% in April.

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