WA jobless rate tumbles again

Australia’s unemployment rate unexpectedly dropped to 5.1 per cent in May, returning to its pre-pandemic level.

It has sparked talk that the Reserve Bank of Australia may need to raise interest rates earlier than 2024.

WA continues to have one of the nation’s lowest jobless rates after falling from 5 per cent in April to 4.7 per cent in May. Only the Northern Territory and the ACT reported better figures.

The sharp drop in the national unemployment rate from 5.5 per cent in April came as a much larger than expected 115,200 people joined the workforce in May.

Economists had expected the jobless rate to hold at 5.5 per cent with a more modest 30,000 increase in employment.

This was the seventh consecutive drop in the unemployment rate, the Australian Bureau of Statistics said on Thursday.

BIS Oxford Economics senior economist Sean Langcake said the labour market has weathered the withdrawal of the JobKeeper wage subsidy in March very well.

“There are no signs of lingering effects in today’s data,” he said.

He said with the labour market remaining well ahead of the RBA’s expectations, wage pressures are likely to emerge sooner than it expects.

“We expect the RBA will need to bring forward their plans for a rate hike into 2023,” he said.

ABS head of labour statistics Bjorn Jarvis said the number of unemployed people has fallen by around 303,000 since the peak of one million in July 2020.

“The declining unemployment rate continues to align with the strong increases in job vacancies,” he said.

Speaking before the release of the jobs figures, RBA governor Philip Lowe said while some businesses are finding it hard to hire workers, wage increases have been modest.

In his first public appearance since March, Dr Lowe told an audience in Toowoomba that while the labour market was tightening, wages growth and inflation remains subdued.

“It is noteworthy that even in those pockets where firms are finding it hardest to hire workers, wage increases are mostly modest,” Dr Lowe told the Australian Farm Institute conference.

“There are some exceptions to this, but they are fairly isolated.”

The RBA wants to see inflation sustainably within the two to three per cent target before it considers raising the cash rate from its record low 0.1 per cent.

This, it says, will need wage growth to double from its current low rate of 1.5 per cent and the unemployment rate substantially lower, events it does not expect until 2024 at the earliest.

Dr Lowe said he expected the consumer price index to spike to about 3.5 per cent in the June quarter due to the unwinding of some pandemic-related price reductions.

“There have also been price increases for some items due to pandemic-related interruptions to supply. But beyond this, inflation pressures remain subdued and are likely to remain so,” Dr Lowe said.

LABOUR FORCE DATA FOR MAY

• Unemployment rate - 5.1 per cent versus 5.5 per cent in April
• Underemployment rate (employed people seeking additional work) - 7.4 per cent versus 7.8 per cent
• Employment rose 115,200
• Full-time positions rose 97,500
• Part-time employment rose 17,700
• Participation rate (people working or looking for work): 66.2 per cent versus 65.9 per cent

STATE UNEMPLOYMENT RATES

• NSW - 5 per cent in May versus 5.5 per cent in April
• Victoria - 4.8 per cent versus 5.5 per cent
• Queensland - 5.4 per cent versus 6.1 per cent
• SA - 5.8 per cent versus 5.7 per cent
• WA - 4.7 per cent versus 5 per cent
• Tasmania - 5.7 per cent versus 6.2 per cent
• NT - 4.5 per cent versus 3.8 per cent
• ACT - 3.6 per cent versus 3.4 per cent

(Source: Australian Bureau of Statistics)