July AU Labour Force Survey: A Step in the Right Direction


The Australian unemployment rate dropped to an almost six-year low in July, while wage growth posted its strongest quarterly gain since March 2014.

In July, the unemployment rate in Australia dropped to its lowest level since October 2012. At 5.4% the level of unemployment is still relatively high, particularly when factoring in those searching for more hours, but it is certainly a step in the right direction. Participation in the workforce also remained high in July.

Employment rose by 26,900 people in July on a trend basis and has increased by an average of 20,500 people per month this year. That is a far cry from the 33,600 people who joined the labour force each month last year, but if replicated for the remainder of the year we’d conclude that it has been a solid year for the Australian labour market.

Full-time employment growth was lacklustre in early 2018 but has rebounded over the past three months, accounting for almost two-thirds of growth. The creation of high-quality full-time roles is imperative to bringing down the level of labour market slack across the country. And that is the key to pushing wages higher.



On the wage front there was a glimmer of hope in the June quarter. Wages rose by 0.6% in the quarter, which by itself is a poor result but in the context of negligible recent wage growth is a step in the right direction. It was the strongest quarterly result since March 2014.

Nevertheless, wage growth still has a long way to go before it returns to a level that was once considered normal. That process will be slow and further declines in the rate of unemployment and underutilisation will be necessary if wage growth is to go up a gear.

A big positive in the latest set of labour figures has been the sharp decline in the youth unemployment rate. The unemployment rate among 15 – 24 year olds fell to 11.1% in July, from 12% just three months ago.

Finally, at the state level we continue to see a two-speed labour market. The unemployment rates in New South Wales and Victoria sit near 5% and are well below that of the other states. By comparison, the unemployment rate in the two mining states, Queensland and Western Australia, remains above 6%.

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