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Jobs figures fail to impress economists

AAP logoAAP 19/08/2016 Garry Shilson-Josling, Economist

The focus for economists this week was the monthly jobs figures, which looked good on the surface but not so impressive after a closer examination.

Australia's jobless rate fell by a notch, while employment grew by a solid-looking 26,200.

But jobs growth was dominated by part-time workers, continuing a trend over the past year, when full-time workers accounted for fewer than one in seven new jobs.

St George bank economists Janu Chan and Jeremy Pilat said the July figures were consistent with the Reserve bank's view that the unemployment rate would fall marginally over the coming two years.

"However, the strength in part-time work, soft wage growth and an unemployment rate at 5.7 per cent suggests that a fair degree of spare capacity remains," they said.

As a result, they expect the central bank to lower the cash rate from its current record low of 1.5 per cent as far as 1.0 per cent by mid-217 to try to get inflation back up into the two to three per cent target range.

AMP's Shane Oliver zeroed in on underemployment - the number of employed people wanting more hours.

"While jobs growth was much better than expected in July and unemployment fell back to 5.7 per cent, the quality of jobs growth remains poor with another surge in part time jobs at the expense of weak full time jobs," he said.

"And this in turn is keeping the combination of unemployment and underemployment very high at over 14 per cent and driving wages growth including bonuses to a record low of just two per cent year on year in the June quarter."

Commonwealth Bank's Kristina Clifton concurred.

"While the headline employment figures look solid, the composition of employment growth points a greater degree of labour market slack than the current unemployment rate would suggest," she said.

"The impact of the spare capacity is evident in (Wednesday's) wages data, which shows annual wages growth running at its lowest annual rate since the series began."

UBS economists Scott Haslem, George Tharenou and Jim Xu were

not entirely impressed either.

"Solid jobs growth is encouraging, but the details show patches of weakness," they said.

While full-time employment has been weak, the part-time category is trending up at a "booming" pace.

"However, hours worked have trended only approximately flat in 2016 to date and imply much more slack in the labour market than the headline jobs growth or the unemployment rate suggest," they said.

National Australia Bank's Ivan Colhoun also highlighted the dominance of part-time work in employment growth but offered two differing interpretations.

It might mean greater spare capacity in the labour market, he said.

But he pointed out a fall over the past year in the number of people looking for full-time work, and a rise in the the number seeking part-time jobs.

"This might suggest that not all of the softness in full-time employment growth is necessarily reflective of a weaker economy," Mr Colhoun said.

"It might instead be related to the ageing of the population and/or changed working arrangements regarding workplace flexibility."

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