Unemployment steady at 5.6pc as 54,200 jobs added; underemployment remains high

Unemployment steady at 5.6pc as 54,200 jobs added; underemployment remains high

Unemployment steady at 5.6pc as 54,200 jobs added; underemployment remains high

Updated 14 September 2017, 12:55 AEST

A full-time jobs boom over the past year is keeping unemployment in check, but is so far failing to cut underemployment and boost wages.

Australia's unemployment rate has held steady at 5.6 per cent in August, due to the creation of more than 54,000 jobs, most of them full-time.

The Bureau of Statistics estimated that 40,100 full-time positions were added to the economy last month, with a further 14,100 part-time jobs also created, seasonally adjusted.

The level of job creation was more than three times higher than what was expected by most economists, pushing the Australian dollar back above 80 US cents upon its 11:30am (AEST) release.

The reason the strong job creation did not lower the jobless rate from 5.6 per cent is that the ABS survey also recorded an increase in the proportion of people aged over 15 in work or looking for it — the participation rate — to 65.3 per cent.

That is the highest participation rate in almost five years.

Despite the increase in full-time work and the participation rate, the ABS only recorded a 0.4 per cent increase in total hours worked last month.

The Bureau of Statistics prefers to look at the more stable trend figures and, on that basis, its chief economist Bruce Hockman noted in the report that the August numbers continue a recent move towards stronger growth in full-time employment.

"Full-time employment has now increased by around 253,000 persons since August 2016, and makes up the majority of the 307,000 person increase in employment over the period," he wrote.

The employment-to-population ratio has also risen to a four-and-a-half-year high, as job creation exceeded population growth.

Underemployment remains high, wage outlook low

On a seasonally-adjusted basis, the quarterly underemployment rate has eased from a record high of 8.9 per cent in February to 8.6 per cent in August.

However, Mr Hockman said underemployment — which is where workers want and are available for more hours of work — is still at a record high level in trend terms.

"The underemployment rate is an important indicator of the spare capacity of workers in Australia, and it has remained at 8.7 per cent, a historical high, for the third consecutive quarter," he noted.

Underemployment is much more common amongst female workers, where the trend level is 10.8 per cent, versus 6.9 per cent for men.

Economists are concerned about the persistently high underemployment rate — which is around a percentage point above global financial crisis levels — because the pool of workers who want more hours continue to put downward pressure on wage growth, which is at its lowest level since the last recession.

Paul Dales from Capital Economics said the underutilisation rate — which combines the unemployment and underemployment rates — fell from 14.4 per cent in May to 14.1 per cent in August.

"But it needs to fall to around 12 per cent before we can say that there is a 'normal' amount of spare capacity in the labour market," he wrote in a note.

"As such, while faster employment growth will put more money in households' pockets, it probably won't translate into much faster wage growth."