Data warp - another disappointing jobs market report in spite of improved business confidence


In this edition of the Data Wrap we find a silver lining in another round of disappointing labour market figures, a familiar story regarding wages growth, and positive news on business confidence in South Australia. The latest inflation outcomes for local government are also considered.

Employment growth remains stalled but full-time employment grows solidly
South Australia’s recent patch of stagnant employment growth continued in January, with total trend employment falling by around 200 people, latest ABS Labour Force Survey data show.

South Australia’s trend unemployment rate rose by 0.1 percentage points to 6.0 per cent in January, which compares with a previous low of 5.6 per cent in July 2018. There was a small rise in the trend participation rate to 62.8 per cent in January, while the state’s underutilisation rate remained steady at 15.1 per cent.

Although total employment levels have not improved since May 2018, full-time employment has been growing strongly, contributing to solid growth in hours worked. Total full-time employment rose by 1.8 per cent through the year to January, while monthly hours worked rose 1.6 per cent. These rises are more than double the expansion of the civilian population working age population over this period (0.8 per cent).

At the national level, the trend unemployment rate remained unchanged at 5.1 per cent in January 2019. Looking at other states and territories, unemployment rates remain quite low in New South Wales (4.1 per cent) and Victoria (4.5 per cent), and somewhat elevated in Western Australia (6.6 per cent), Tasmania (6.2 per cent) and Queensland (6.1 per cent).

Business confidence returns to decade-high level
The latest Business SA – William Buck Survey of Business Expectations indicates that business confidence in South Australia returned to a post Global Financial Crisis high level in the December quarter of 2018. Business confidence was up 18 points compared to the December quarter 2017, and up 33 points compared to a decade earlier.

The improvement in business confidence did not extend to business conditions. The general business conditions index fell by 7.6 points over the past year, but remains 13 points above its past decade average level.

In terms of the short-term outlook, almost one-third of businesses thought their business would improve relative to general business conditions over the next 3 months, while 55 per cent thought conditions would remain the same.

Low wage growth continues
In spite of historically low unemployment, wages in Australia continue to grow at a modest pace. In trend terms, the ABS Wage Price Index rose by 2.3 per cent through the year to the December quarter 2018. While this represents a small improvement from growth of 2.1 per cent over the previous year, it remains well below the average pace of 3.3 per cent seen over the previous two decades.

A similar story applies for South Australia. Through the year growth in wages for the state, measured in original terms, rose from 1.9 per cent in the December quarter 2017 to 2.3 per cent in the December quarter 2018. Private sector wages grew by 2.3 per cent last year, their fastest annual pace since September 2015. In comparison, public sector wages rose 2.5 per cent.

Local government price inflation moderates
The December quarter 2018 results for the Local Government Price Index (LGPI), which measures price movements faced by councils in South Australia, were released by the SA Centre for Economic Studies today.

The LGPI rose by 0.6 per cent in the December quarter of 2018. In comparison, the Adelaide Consumer Price index, which measures inflation faced by households, rose 0.5 per cent.

Inflation for both the local government sector and households moderated through the course of 2018, although the slowdown was more pronounced for households. Annual growth in the LGPI slowed from 3.1 per cent in the March quarter 2018 to 2.9 per cent in the December quarter 2018. Price inflation for Adelaide households slowed from 2.3 to 1.6 per cent over this period.

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