In the first read on the labour market that’s been received since the Reserve Bank of Australia’s consecutive rate cuts, BIS Oxford Economics’ senior economist, Sean Langcake, has explained that the labour market continues to perform well, despite the addition of only 500 jobs in June.
The unemployment rate has held steady at 5.2 per cent for the third consecutive month, leading to the participation rate “remaining at its record high level of 66 per cent”.
Mr Langcake noted an increase to the full-time employment figures as being “mostly offset by a decline in part-time employment”.
“As a result, the underemployment rate has ticked back down to 8.2 per cent,” he continued.
Commenting that more full-time employment bodes well for growth in household incomes, the economist explained the “puzzle” that is strong employment growth in comparison to continued “weak output growth”.
As a result, Mr Langcake explained that labour productivity, or the output per worker, is now in decline, which has combined with a “slack in the labour market” to create a weight on wage growth.
“With people continuing to enter the labour market and/or seek more hours than they currently work, there is very little supply side pressure on wages,” the economist explained.
And with labour productivity falling, “firms cannot sustainably increase wages for workers without reducing their profit margins”, he stated.
The RBA “will be looking for further employment growth in the coming months”, according to the economist, with the material impact aimed at seeing unemployment and underemployment rates fall further.
Mr Langcake said, “We expect the RBA board to cut rates at least once more this year, taking the cash rate to 0.75 per cent by year-end”.
Grace Ormsby is a journalist for Momentum Media's Nest Egg.
Before moving into the finance realm, Grace worked on Nest Egg's sister site Lawyers Weekly, and was previously a staff reporter at the NSW Business Chamber.
She holds a Bachelor of Communication (Journalism), a Bachelor of Laws (Hons) and a Diploma of Legal Practice from the University of Newcastle.