Jobs up but wages woes continue
Australian wages growth continues to be well below the average, despite improving in 2018. At 2.3% for the year, average wages growth is languishing behind the long-term average of 3.2% per annum. The good news is that wages growth is tracking ahead of inflation, which means there has been real wages growth. But it is, in these days of near full employment, very modest real wages growth indeed.
The number of people in employment in Australia lifted to 12.752 million in January 2019, as the chart below shows. The growth in employment came as the unemployment rate was maintained at 5.0%, albeit the number of unemployed people rose to 673,500.
To go straight to the dashboard and take a closer look at the data, click here.
Although the employment participation rate remained at 65.7% (just below the all-time peak of 65.8%), it is widely recognized as an increasingly suspect measure. This is mainly because there are plenty of people in jobs who would like more hours of work, or a better job. That is why emphasis now turns to measures of under-employment.
The chart below shows the extent of under-employment – around 8.4%, and significantly higher than the 5.0% unemployment rate. Under-employment is the combination of unemployment and the extent to which people are not fully employed. Despite the unemployment rate coming down, the under-employment rate is stubbornly high.
As the chart below shows, real wages growth tipped up from about mid-2016, but ever so modestly at just 0.4% for 2018. As Greg Jericho described in The Guardian:
“…the growth of real wages remains utterly limp compared with in the past. Prior to the GFC, real wages grew at an average pace of 0.9% each year, and from 2010 to 2013 they grew at 1.1%. It is now four and half years since real wages grew by 0.5% and six years since they grew by more than 1%.”
A second chart prepared by Jericho shows the lousy rate of real wages growth more clearly.
In its Mid-Year Economic and Financial Outlook (MYEFO), the government predicted that real wages growth will be at 2.5% by mid-2019 and 3.0% by mid-2020. Both targets seem challenging in the face of current evidence.
For those concerned to ensure that the Australian housing economy has the financial fuel to return to growth relatively quickly, or who need retail sales to drive their businesses forward, improvements in real wages growth are of vital importance.