Congratulations to the Turnbull government for fulfilling its (well, Tony Abbott’s) promise of creating 1 million jobs since the September 2013 election. From September 2013 to April this year, 1,013,631 jobs have been created. The government has been quick to celebrate its achievement, and rightly so.
Alas, the jobless-less rate (in seasonally adjusted terms) was 5.6% in April … which just so happens to have been the rate in September 2013. That reflects what is actually the government’s real achievement — a big rise in the participation rate from 64.8% to 65.6%. That includes a 1.8-point jump in female participation. That’s an achievement to be genuinely proud about. It means greater economic empowerment for women. It may well be Turnbull’s lasting economic legacy.
Something conspicuously missing from the boasting this week was wages. The March quarter wage price index (WPI) showed a 0.5% quarterly rise and 2.1% increase in the year to March. In the September quarter 2013, there was a 0.6% rise and 2.8% year on year. But by then, the stagnation had already set in. Six months earlier, when Julia Gillard and Wayne Swan were in charge, the quarterly rise was 0.7% and the annual rate was 3.1%. Unemployment was 5.6% then, too.
And funny how these million jobs have been created despite Australia’s supposedly punitive company tax rate of 30%, except for small businesses, which have just recently begun enjoying a lower tax rate. The government claims that wages growth will pick up when large corporations get a massive tax handout. But it can’t have it both ways — either the current tax rate has helped achieve strong jobs growth, or it has helped retard wages growth. Both can’t be true.
Worse, the biggest sources of jobs growth have been in healthcare and education, where the company tax rate is almost completely irrelevant. That’s also the reason for the surge in female participation, giving both sectors are dominated by women; indeed, it maybe that the establishment of the NDIS — a Labor creation — is the basis for Turnbull’s legacy of female economic empowerment. The other big driver of job growth in 2017 (after a quieter 2016) was construction — reflecting both the housing investment boom and increased infrastructure spending in Sydney and Melbourne by the NSW and Victorian governments. Again, virtually nothing to do with the company tax rate.
But all this is looking back. The jobs boom, it seems, is history. Yesterday’s jobs figures confirmed an emerging theme of the past three months: full-time job creation has slowed, from 321,000 between December 2016 and December 2017 to 265,300 between April 2017 and April this year. The annual rate of seasonally adjusted jobs growth is down from 3.3% to 2.9%. That’s still strong — it’s well above the average for the past 20 years of 1.9% — but we’re past the peak of job creation.
JP Morgan economist Tom Kennedy told Fairfax that the employment surge was largely due to a spate of hiring in the healthcare and construction sectors. “Together they contributed more than half of last year’s total employment growth,” he said. And he (along with other economists) have pointed out that the outlook for the jobs market was not as solid as last year.
The first quarter of data showed the slowdown was more “pronounced than we had anticipated” and April’s figures added to that. If the first quarter trend continues for the rest of the year, the annual rate of job creation will slow from 2.9% back towards the 1.9% average.
So don’t hold your breath for strong jobs growth to drive higher wages.