Australia’s unemployment rate is stuck at 5.2 per cent, which means the RBA is set to go for even more rate cuts.
Australia needs unemployment to go down so there’s not so much “slack” in the labour market, which will force firms to start offering higher wages.
The ABS data showed that the slack is still abundant. The month of July showed the economy actually did well in one sense by moving 41,000 people into jobs, which were mostly full-time. But that wasn’t enough.
However, with so many more people coming into the job market every month, the unemplyment rate did not reduce. In fact, the ABS showed the number of unemployed people went up by 800.
Then they have the underemployment rate, which rose meaning even more people would like to work more hours.
Sadly, wages growth in Australia remains weak.Weekly earning rose by only 2.5% over the last year, just keeping ahead of inflation. Wages used to grow by an average of 4% or more.
There are two big reasons weak wages growth matters:
1. The economy is a big cycle. One person’s spending is another person’s income, and weak wages growth slows down that cycle. If wages aren’t increasing then people generally spend less, making someone else’s wages fall.
This is called the “paradox of thrift”. One person trying to be frugal is fine, but if we all do it at once, the economy stumbles.
2. Australia has record high levels of household debt. Paying down a million-dollar mortgage is not so hard if you can rely on 4 per cent pay rises each year.
A mortgage holder counting on strong wages growth to pay off their home loan will find it harder than previous generations…
Read the full article on news.com.au: https://www.news.com.au/finance/work/careers/australian-unemployment-rate-is-stuck-at-52-per-cent-keeping-slack-in-labour-market/news-story/b483ba3ce5f367df1e702d53f40d1dd4.