SA Data Wrap – a mixed labour force report, sluggish wages growth and higher inflation for local government

South Australia records mixed labour market performance in October
South Australia’s trend unemployment rate fell to 5.6 per cent in October, down from 5.8 per cent in September. However, the improvement was partly driven by a decline in the participation rate, which fell by 0.1 percentage points to 61.9 per cent. This fall in participation explains why the number of unemployed persons fell (-1,467 persons) by much more than the number of jobs created (+474 persons).

The national trend unemployment rate remained steady at 5.5 per cent in October. Only New South Wales (4.7 per cent), the Northern Territory (4.2 per cent) and Australian Capital Territory (3.8 per cent) recorded lower trend unemployment rates than South Australia in October.

The latest ABS figures do not capture the full impact of the closure of Holden’s Elizabeth plant which occurred toward the end of the month. Job losses at the motor vehicle manufacturing plant and in the broader supply chain will put upward pressure on South Australia’s unemployment rate over subsequent months.

Wage growth remains sluggish
Wage growth in Australia remains weak with official figures released by the ABS on Wednesday showing no signs of improvement during the September quarter. The Wage Price Index (WPI) – a measure of the “price” of wages and salaries in the labour market – rose by 0.5 per cent in the September quarter in trend terms. This result was unchanged from the previous quarter, and growth has in fact remained stuck at around 0.5 per cent per quarter since mid-2015.

Through the year to the September quarter wages nationally rose by 2.0 per cent in trends terms. This compares with an annual average growth rate over the previous decade of 3.2 per cent.

State level data, which are only available on an original basis, show that wages growth for South Australia has tracked national movements. The WPI for South Australia rose by 0.9 per cent in the September quarter to be up 2.0 per cent through the year. In comparison, national wages on an original basis rose by 0.8 per cent in the September quarter to be up 2.0 percent through the year.

Sluggish wages growth is a significant concern since labour incomes are the primary determinant of households’ spending capacity, which in turn accounts for a majority of economic activity.

Costs pressures faced by local government rise
September quarter results for the Local Government Price Index (LGPI) were published by the SA Centre for Economic Studies yesterday. The LGPI represents a measure of price inflation faced by local government in respect of their purchases of goods and services.

The latest results show that price inflation faced by local government has continued to pick up over recent quarters. While the LGPI rose by 1.4 per cent through the year to the September quarter 2016, it rose by 2.5 per cent through the year to the September quarter 2017. In comparison, annual growth in the Adelaide Consumer Price index rose from 1.2 per cent to 1.8 per cent between these periods.

The lift in price inflation for local government has been brought about by higher prices for both recurrent and capital expenditures. In terms of the former, utility prices have grown much more strongly over the past year, while prices for capital expenditures such as road construction works and plant and equipment have exhibited stronger trends.

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