Labour market statistics

Labour costs edge higher

1 May 2019
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Rob Heyes

Our take on the latest Labour market statistics (Wed 1 May 2019)

Labour cost inflation edges higher to 2.0%pa
Unemployment falls to 4.2%
Employment fell 0.2% over the quarter

The key numbers...

  • Although labour cost inflation hit a seven-year high of 2.0%pa, in 2008 - the last time unemployment was below 5.0% - we saw labour cost inflation as high as 3.9%pa.
  • Our expectations remain for labour costs to increase above 2.0%pa in the next few years as firms are forced to pay more to attract and retain workers, as well as larger minimum wage increases.
  • The divergence between full-time and part-time employment suggests firms are shifting staff towards longer hours to cope with the shortage of available workers.
  • We don’t expect today’s labour market data to change the Reserve Bank’s stance on interest rates. If anything, the lack of employment growth over the last six months reinforces the likelihood that the official cash rate will be cut this year

Labour cost inflation

APC (%)
3222

...and our reaction

  • Labour cost inflation increased slightly to 2.0%pa in the March 2019 quarter.
  • The seasonally adjusted unemployment rate fell to 4.2% in the March 2019 quarter.
  • Employment growth increased to 1.5%pa despite a 0.2% fall in employment over the quarter. Growth in full-time employment continues to be strong at 3.1%pa, but part-time employment fell 4.7%pa.

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