Market Watch

Both sides of the Australian employment market are laid bare this week, as both the wage price index and labour force numbers are released.

The employment change over the past year has been incredible with 415,000 jobs added, two-thirds being full time. 

However, the biggest issue for wage growth has been underutilisation, which remains elevated as slack in the employment market from the past five years continues to filter out. Until the filtering out is complete, wages will remain below trend.

Here is what to look for in the May labour force numbers (Thursday) and first-quarter wage price index (Wednesday).

Labour force numbers

• Employment change consensus is for 15,000 jobs added, which would make this the 19^th month in a row of Australian employment growth.
   
• Unemployment to remain at 5.5 per cent, still above the forecasts of the Reserve Bank of Australia (RBA) and our Government at this point in the cycle.
   
• Participation rate 65.5 per cent, which would be strong considering Australia’s ageing population. This elevated read is down to record levels of women entering the workforce (and may it continue).
   
• Underutilisation was sitting at 13.4 per cent in the April figures. Any signs of a drop here will be perceived as a positive. 

Wage price index

• Consensus estimates for quarter-on-quarter growth is 0.6 per cent, and year-on-year growth at 2.1 per cent. Remember, headline inflation sits at 1.9 per cent, meaning real wage growth remains at 0.2 per cent.
   
• This would be the third quarter in a row of increasing wages, which bottomed out in the second quarter of 2017. Wages are a laggard to employment growth, and considering the increase in employment, one should expect some increase in wages, however small that may be. 
   
• Look to the sector breakdown for further signs of widening gaps between business-related industries (mining manufacturing, and professional services) and household-related industries (retail, telecommunications and media, and accommodation). Household-related industries have been the biggest laggards to date.