Employment Conundrum Continues

16th of August, 2019

The latest employment data only adds to the frustration that the RBA is having in fulfilling its full employment mandate.

Australia’s employment data continued to be bitter sweet for the RBA. The July employment survey saw another bumper month of jobs growth with another 41,100 new jobs, mostly fully time, created over the month.

Despite the solid growth, it made little inroad into the spare capacity in the labour force. The supply response from the labour market saw another increase in the participation rate, helping absorb the new growth in employment. It meant that the unemployment rate remained sticky at 5.2%, well above the new estimate level of full employment.

The labour market’s ability to generate new jobs growth continues to defy leading indicators of employment. Time will tell whether or not this continues with more leading indicators flagging softer employment growth ahead. If this turns out to be the case, any further increase in the participation rate will see upward pressure on the unemployment rate.

Elsewhere overnight central banks and the bond market rally remain in the spotlight.

In an interview published in the WSJ overnight, the ECB’s Olli Rehn confirmed the ECB is primed and ready to deliver a new wave of stimulus to boost the lacklustre European economies. He indicated the package will be designed to overshoot market expectations which ignited a further rally in bond markets.

Matthew Dunshea

Client Relationship Manager