Jobs growth surprise in unemployment data

Australia's unemployment rate was steady at 5.6 per cent in August but the economy added a higher-than-expected 54,200 jobs, official figures show.

Australia's economy has added more jobs than expected in August, underscoring an improvement in labour market conditions that has seen nearly a quarter of a million jobs added over the past six months.

The total number of jobs rose by 54,200, data from the Australian Bureau of Statistics on Thursday showed - the biggest increase in nearly two years and far higher than the 20,000 increase the market had expected.

However, an uptick in the labour force numbers has kept the unemployment rate unchanged at 5.6 per cent and is likely to keep wages growth flat and limit the Reserve Bank's ability to move on rates, economists said.

Full-time employment again accounted for the bulk of the gains, rising by 40,100 jobs.

The number of part-time jobs rose by 14,100.

Economists said the increase was concentrated in the eastern states of Victoria, Queensland and NSW, with quarterly data due next week likely to show strength in a number of key industries such as construction, professional services, and health.

While employment is now increasing at an annual rate of 2.7 per cent, the participation rate, or the number of people either employed or actively looking for work, also ticked up 0.2 percentage points to 65.3 per cent - the highest level since September, 2012.

That increased labour supply is expected to weigh on wages and inflation growth.

"Despite the solid jobs growth, we think that we are still some way from labour market slack being eroded sufficiently to put genuine upward pressure on wages," CBA senior economist Gareth Aird said.

Australia's jobs market has seen an acceleration in full-time job creation over the past six months but wages growth has remained weak, raising concerns about an impact on consumer spending.

The quarterly seasonally adjusted underemployment rate decreased by 0.2 percentage points to 8.6 per cent, while the under-utilisation rate - which combines the unemployed and underemployed - fell by 0.2 percentage points to 14.1 per cent.

RBC Capital Markets economist Su-Lin Ong said while the data was consistent with the RBA's optimism and narrative about a stronger labour market, there would need to be more evidence for it to move earlier than expected on rates.

"Considerable slack remains as evidenced by the still elevated, albeit improving, underutilisation rate," Ms Ong said.

"Accordingly, we expect the RBA to remain in watch and wait mode with the cash rate on hold for the foreseeable future."

The RBA is widely expected to increase rates by the second half of 2018, according to an AAP poll of economists earlier this month.

The Australian dollar rebounded after the strong employment data, climbing to a high of 80.1 US cents, compared to 79.75 US cents just ahead of the 1130 AEST data release.

By 1400 AEST, the Australian dollar had settled at 80 US cents.

Source AAP

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