Australia Jobs Growth Hits Sweet Spot in February
Australia's employers created a solid 22,000 new jobs in February while more people were enticed into the labor force, boding well for consumer demand and economic growth this quarter.
The result topped market forecasts of a 20,000 increase and was considered all the stronger as 20,700 of those jobs were full-time.
Still, the increase in employment was matched by more people looking for jobs, so the unemployment rate ticked up to 4.6%, from a 30-year low of 4.5% in January. "A very solid result that shows the labor market was in a sweet spot in February," said Brian Redican, a senior economist at Macquarie Bank.
"There was good employment growth but more people also were looking for a job, so the unemployment rate edged up," he added. "That's just what policymakers would like to see -- decent jobs growth but not so strong as to add to wage pressures."
The Reserve Bank of Australia (RBA) has long been concerned that the drum-tight labor market would eventually lead to rising wage and price pressures. It raised interest rates three times last year to curb such pressures and has had some success with inflation slowing last quarter.
"I think the Reserve Bank will be looking at this data and it will raise concerns about the potential acceleration in wages growth," said Jarrod Kerr, an economist at JPMorgan. "But there's certainly no cause for alarm," he added. "The labor market is as tight as it has ever been, but we are not seeing an immediate flow through into the wages numbers."
Financial markets took the data as merely confirming a tightening bias and bill futures showed a one-in-four chance of a rise in the 6.25% cash rate this year. The Australian dollar held steady around 78.60 U.S. cents while bond futures were lower after being hit by a rally in U.S. equities.
Australian Treasurer Peter Costello welcomed the figures, while noting that there was always going to be some pressure on interest rates when unemployment was near 30-year lows.
In recent testimony to parliament, RBA Governor Glenn Stevens emphasized that being close to full employment meant the economy could not run as fast as it had in the past. The economy has grown without interruption for 16 years now. Yet he also noted that official wages measures were well contained despite a tight labor market.
Data out earlier in the week showed wage growth in enterprise bargains remained benign in the fourth quarter of last year. Average annualized wage increases in the quarter rose by 3.8%, up only slightly from 3.7% in the third quarter.
Likewise, the government's main measure of wage costs was running at a tolerable 4% a year. Analysts tend to see growth of 4.5% or more as a threat to inflation.
Part of this restraint was put down to a more decentralized wage system and part to an increase in the supply of labor thanks to higher participation of women in the workforce and a rapid pace of skilled immigration.
Still, the RBA's Stevens also noted that businesses the central bank talked to were reporting widespread upward pressure on labor costs. That was one reason Stevens said it was "too soon, if you like, to declare victory" on inflation.