Australian Employment Revives in July
Australian employment revived in July as more people got full-time jobs, holding unemployment near 33-year lows and keeping upward pressure on wages and inflation.
Thursday's figures showed employment rose 21,800 in July, just short of forecasts of a 25,000 gain, but that came after June's result was revised up to a 9,100 gain from a 2,500 gain. Almost all the gains were in full-time employment, which climbed 21,700, jobs which typically pay more and have better benefits than part-time employment.
The Australian dollar rose, while bond and bill futures extended early losses, as the data added to speculation the Reserve Bank of Australia (RBA) might have to raise interest rates yet further.
The data come just a day after the central bank hiked its key cash rate to a decade high of 6.50%, citing in part the relentless fall in the unemployment rate.
"It shows the underlying wisdom of the decision yesterday to tighten policy," said John Edwards, chief economist at HSBC. "It demonstrates how the RBA sees Australia operating at the limit of its capacity," he added. "It's another signal of how well the economy is doing. We
are likely to see another rate hike."
Financial markets are fully priced for a rise to 6.75% within the next twelve months while a Reuters poll of 24 analysts found the majority expect another move, likely early next year.
And it was not clear that higher rates alone would slow the jobs market. Across the Tasman, New Zealand's central bank has hiked rates four times this year to 8.25%, yet the jobless rate fell on Thursday to a record low of 3.6% last quarter.
Desperately Seeking Labor
Australia's jobless rate held steady at 4.3%, just above May's 33-year low of 4.2%. That surprised some economists who had thought a change in welfare rules would have forced more people into the labor force in July and pushed up the unemployment rate, perhaps sharply.
The Australian Bureau of Statistics said it was unable to estimate the impact of the welfare changes on the labor force, although analysts suspected it would be felt in future data.
"There is a risk that these participants may gradually enter the labor force in the coming months, but we would expect them to be absorbed given the tightness of the labor market and be a welcomed supply factor," said Su-Lin Ong, a senior economist at RBC Capital Markets.
Indeed, an extra supply of workers would be warmly welcomed by firms who have been complaining of a lack of suitable labor. Employers created a net 254,200 new jobs in the year to July, an impressive result in a country with a labor force of less than 11 million.
Growth has been greatest in business services, such as finance and property, in construction and manufacturing and in household services like cafes and restaurants.
Treasurer Peter Costello welcomed the jobs figures, saying Australia was pressing toward full employment and that would not necessarily set off a wage-price spiral.
The RBA has long been concerned that fierce competition for labor would drive up wages and prices, but apart from the hot spots of mining and construction, wages growth across the economy has been remarkably subdued.
The government's main indicator of wage costs is running at around 4.1% a year, below the 4.5% barrier that analysts consider a risk to inflation.