Australia | May 13 2010
By Chris Shaw
Australian labour force data for April has again surprised on the upside, total employment rising by 33,700 positions against market forecasts of an increase of a little more than 20,000 jobs. Full-time jobs led the way in recording a rise of 37,500, while part-time positions fell by 3,900.
The data for March was also revised up to show job growth of 27,700, up from 19,600 previously. CommSec economist Savanth Sebastian notes the April data means Australia has created 316,800 jobs over the past eight months, a result he suggests is incredible given what has taken place in the global economy during that time.
The fact the data was better than expected should not be a great surprise according to National Australia Bank, as it notes actual employment has beaten market expectations in seven of the past eight months.
Sebastian notes the April data showed a 0.5% fall in average hours worked, so while more workers were added to payrolls, collectively Australians worked fewer hours. This implies output fell modestly for the month.
The data means unemployment remained steady in April at 5.4%, while the participation rate was also essentially unchanged at 65.2%. This was a very good outcome according to NAB, as it means there is now a supply response in the labour market. If this trend continues it should cap wage rises for at least a while in the bank's view.
Looking ahead, the fact hours worked fell slightly leads Westpac to suggest coming months will see a more moderate pace of monthly trend jobs growth. The bank expects this will see unemployment approach the 5.0% level only very slowly through the second half of 2010.
Commsec's Sebastian has a similar forecast, anticipating Australia's unemployment rate will be at 5.0% by year's end. As he notes, 25,000 jobs need to be created each month just to match the number of new entrants into the workforce.
ANZ Banking Group senior economist Amber Rabinov has similar expectations of 5.0% unemployment by year's end but NAB is more bullish on the unemployment outlook, expecting a rate of 4.5% by the end of this year and 4.0% in 2011.
The data is likely to be well enough received by the Reserve Bank of Australia that market expectations of a pause in the rate hike cycle should be proven correct, with CommSec's Sebastian and NAB both suggesting no changes to interest rates in coming months.
ANZ's Ambinov cautions there remains a risk the Australian economy is heading towards a situation of capacity constraints and inflationary pressures in coming months. To reflect this she expects a number of rate hikes in the second half of the year, forecasting a cash rate of 5.25% by the end of December.
Today's labour force data helped the Australian dollar regain some ground, though Westpac continues to favour selling strength in the currency. While there may be a push towards some likely stops at the USD0.9020/30 level the bank suggests any move past USD0.9070 would be a selling opportunity.
