Data wrap - employment levels improve as inflation slows

Employment levels continue to improve
At first glance, one can be forgiven for being disappointed by the latest labour market report for South Australia which was released by the ABS yesterday. The state’s trend unemployment rate remained unchanged at 6.0 per cent in April, while the more volatile seasonally adjusted estimate rose by 0.2 percentage points to 6.1 per cent. However, total employment maintained an improved trend in April, as it has over recent months, with around 2,050 jobs being added during the month.

Due to the recent rebound in job creation, total employment in April was 1.4 per cent higher compared to a year earlier – a much stronger annual rise than was suggested by the March labour market report. While the rate of employment growth outpaced expansion in the working-age population over the past year (1.0 per cent), the unemployment rate still rose from 5.7 per cent in April 2018 to 6.0 per cent in April 2019.  As such, the rise in unemployment was driven entirely by a lift in the participation rate – from 62.8 per cent to 63.2 per cent – which indicates that more people are now actively seeking jobs.

One of the more notable developments suggested by recent labour market data is an improvement in population growth for South Australia. The ABS estimates that the civilian population aged 15 years and over rose by 1.0 per cent through the year to April 2018, which compares with a rise of 0.8 per cent a year earlier.

South Australia’s unemployment rate remains high relative to the national rate (5.1 per cent) and most other states and territories. Only Tasmania (6.7 per cent) and Western Australia (6.1 per cent) recorded higher trend unemployment rates in April. Unemployment remains quite low in New South Wales (4.3 per cent), the Northern Territory (4.5 per cent) and Victoria (4.8 per cent), but elevated in Queensland (5.9 per cent).

Inflation faced by local government and households slows
The March quarter results for the Local Government Price Index (LGPI), which measures price movements faced by councils in respect of their purchases of goods and services, were released by the SA Centre for Economic Studies on Wednesday. The latest results indicate that price inflation faced by the local government sector has moderated over the past year. Annual growth in the LGPI eased from 3.1 per cent in the March quarter 2018 to 2.1 per cent in the March quarter 2019.

The moderation in price inflation for the local government sector has occurred alongside an unexpected slowdown in consumer price inflation. Household inflation as measured by the Adelaide Consumer Price Index slowed from 2.3 per cent over the year to the March quarter 2018 to 1.3 per cent in the March quarter 2019. Despite these slowdowns, inflation over the past year remained 0.8 percentage points higher for the local government than household sector.

Wages growth fails to pick up
Wages and salaries data released by the ABS earlier this week reveals that nominal wages growth remains stuck near historic lows. The wage price index for South Australia rose by 2.1 per cent through the year to the March quarter 2019, which is only marginally stronger that the historic low of 1.9 per cent that was recorded in the December quarter 2017.

Wages growth for Australia over the past year was marginally stronger at 2.3 per cent, but also near historic lows.

Although nominal wages growth remains sluggish, real wages growth has finally improved in response to the slowdown in consumer price inflation. Real wages for South Australia rose by 0.8 per cent over the past year, which compares with a rise of just 0.2 per cent over the previous year. Nationally, annual real wages growth improved from 0.2 per cent to 1.0 per cent between these periods.