Australia | Oct 07 2010
By Greg Peel
Economists had been gearing up for a positive jobs number for September but the addition of 49,500 new jobs has still surprised to the upside by more than double.
Westpac notes annualised jobs growth is now running at 3.3%, up from 3.2% in August, but that 6-monthly growth is running at the fastest pace since May 2007 which is just before all the fun began.
Full-time growth was 55,800 implying a drop in part-time workers, so it's no longer a story of companies cautiously employing on a part-time basis. The participation rate increased to 65.6% from 65.4% in August.
The unemployment rate nevertheless stayed put at 5.1%. It must be remembered that jobs growth first has to overcome population growth before the actual rate of unemployment can fall. But Westpac, for one, expects that while the pace of jobs growth will likely hover around 32,000 per month from here, that is sufficient to overcome population growth and hence an unemployment rate below 5% is anticipated by year-end.
Should the RBA now be looking foolish? Not necessarily.
The Aussie shot up to US$0.9850 on the news and the Aussie's strength does assist the central bank in acting against inflation. Moreover, anticipation is growing that the Big Banks will increase their lending rates, independent of the RBA, at any moment. This, again, does some of the RBA's work for it.
In the meantime, the Aussie is not just rising on anticipation of an RBA rate hike but on a falling US dollar which is rooted in anticipation of QE2.
On Friday night the US jobs data are released and if it's not good, the US dollar will fall further pushing the Aussie up further. It's not the RBA's job to play off the Fed but the central bank does not ignore developments in offshore economies.
But the market will now assume a November rate hike from the RBA is “baked in”.
