The jobs & employment category measures the overall health of the labour market in Australia and in each of the states and territories are some of the categories we carefully watch for our Quarterly Riskwise Risks and Opportunities report .
These measures include: unemployment; underemployment; effective unemployment; and wage growth.
A strong employment market with many employment opportunities triggers stronger migration, higher wage growth and stronger demand for housing.
On the other hand, areas that suffer from poor employment opportunities experience poor and often negative property capital growth.
The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.
During periods of recession, an economy usually experiences a relatively high unemployment rate.
Unemployment is strongly correlated to poor economic growth.
Overall, while there has been a consistent reduction in unemployment, the unemployment rate in Australia of 5.4 per cent as at 19 December 2017, is higher than the 5 per cent benchmark for an equilibrium, as set by the RBA.
WA is close to its 16-year high of 6.6 per cent, illustrating the concerning state of the local economy.
High unemployment plagued TAS and SA in recent years, largely due to the decline of the mining industry.
ACT has consistently delivered low unemployment, largely due to the high supply of government jobs in Canberra.
As a result, it is highly unlikely that unemployment in ACT will rise without a major economic downturn.
Unemployment rates across Australia are predicted to gradually improve in 2018.
The economy is generally strengthening and is likely to produce stable job growth over the medium to long term.
However, in the unlikely event of declining global economic conditions, expect Australian unemployment to increase, particularly in centres more exposed to economic fluctuations, such as NSW.
Underemployment is the under-use of a worker due to a job that does not fully utilise the worker’s skills, is part-time, or leaves the worker idle.
Examples include holding a part-time job despite desiring full-time work, and over-qualification, where the employee has education, experience or skills beyond the requirements of the job.
Underemployment has a similar impact on unemployment.
ACT delivered consistently low levels of underemployment, largely driven by the strength of the bureaucratic employment hub in Canberra.
NT also experienced traditionally low underemployment.
However, this is unlikely to remain at its impressively low level.
The labour markets in TAS, WA and SA have performed poorly in recent years, likely due to unfavourable economic conditions that have led to poor job and wage growth.
Overall, a stable improvement in the job market is likely to lead to a lower underemployment rate.
Underemployment in NT is likely to increase slightly.
With growing part-time employment, declining job vacancies and moderating wages growth, labour conditions may suffer in the short to medium-term.
The effective unemployment rate is an aggregate of the unemployment rate and measured work hours of underemployment.
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The measure provides a more accurate picture of the number of people not employed at their full workforce potential.
Effective unemployment across Australia remains high.
This spare capacity in the employment market is due to imbalances in the market between supply and demand.
While the Australian economy is generating a large number of jobs (376,000 in FY 2016-17), a majority of these are part-time, resulting in high effective unemployment.
QLD, WA and TAS delivered high effective unemployment (relative to its av.).
Meanwhile, NSW, VIC & SA showed some improvement.
The Fair Work Commission’s decision to increase the minimum wage this year further cemented the effective unemployment rate given that businesses are now disincentivized to increase worker hours or hire more staff.
The trend for effective unemployment is to improve over the short to medium term.
However, this is likely to be slower than expected due to high job vacancies levels across Australia.
QLD and SA will likely continue its decline of its effective unemployment as a result of its projected economic gains which are set to drive employment and wage growth.
Wage growth is the percentage change in weekly income.
This data is captured monthly and shows the movement in wage growth over a 10-year period.
Wage growth has a significant impact on housing affordability and median rent. Wage growth has a major impact on inflation and therefore cash rate and interest rates.
All states and territories across Australia experienced gradual wage growth decline.
This has been largely driven by a weakening economy due to changes in the mining sector.
Slow wage growth has remained low in the past quarter despite a moderate increase in the demand for labour.
The public sector consistently outperforms the private sector around wage growth due to moderate demand for working hours by the private sector.
Mining wage growth was the poorest performer.
An overall improving Australian economy is likely to deliver moderate wage growth in the short to medium-term.
However, the RBA Governor, Philip Lowe warned that wage growth may remain low across Australia, threatening his goal of keeping inflation at 2.5 per cent.
NT and WA are likely to remain the worst wage growth performers as a result of their weakened economies.