Australia | Jun 10 2010
By Chris Shaw
Following on from a 35,300 rise in April, the Australian labour force has expanded further in May, recording job growth of 26,900 for the month. The result was better than market expectations of a gain of around 20,000.
CommSec economist Savanth Sebastian suggests the data highlight how job creation remains a feature of the Australian economic landscape, with the good news being most of the improvement is coming in full-time positions. These rose by 36,400 in May, while part-time positions fell by 9,400.
As ANZ Banking Group economist Katie Dean notes, full time jobs have now risen for nine consecutive months, with 224,000 new jobs created in that period. This is the best series of gains in this category since 2006.
As Savanth notes, the strength in job ads early in 2010 implied there would be another round of significant job growth on the horizon and the May figures suggest this is coming to fruition. The unemployment rate reflects this, as it fell to 5.2% in May from 5.4% in April. On a two decimal point measure unemployment now stands at 5.15%, the lowest level for 16-months.
Westpac notes the fall in the unemployment rate was helped by a 0.2% fall in the participation rate to 65.1%, which was slightly below the consensus estimate of 65.2%. Westpac suggests the trend of a gradual fall in the unemployment rate to 5.0% by the end of this year remains intact, particularly as there is still scope for further increases in average hours worked after the gains recorded in May.
Aggregate hours worked rose 2.9% in May, an outcome Dean suggests is a significant catch-up given hours worked has been lagging employment growth considerably in recent months.
The positive, in Savanth's view, is the rise in hours worked means not only are employees holding onto and finding new jobs, but existing workers are getting back the hours they lost as a result of the Global Financial Crisis.
Unemployment at 5.0% at the end of 2010 matches CommSec's forecast, but Sebastian sees this as a somewhat conservative forecast now, with further improvements in the labour market to have implications for the broader economy.
Sebastian points out while consumers are currently not spending, the strengthening job market means actual spending power is being boosted significantly. This is setting the scene for a recovery in consumer spending.
Westpac notes the better than expected labour market data saw the Australian dollar go bid and the bank suggests the currency could now run higher. A move to US$0.8360 appears likely, though there should be some solid resistance around this level in the bank's view.
The data had no impact on interest rate expectations, Westpac noting the bond market continues to price in no further rate hikes this calendar year. The wild card in the bank's view in terms of upcoming data remains the July CPI release.
Dean agrees today's data had no smoking gun for the Reserve Bank of Australia (RBA), as rather than raise concerns the data merely confirm the economy is travelling fairly well at present. This suggests the RBA will remain on the sidelines, at least until the June quarter inflation reading next month.
