Australia | Sep 06 2007
By Greg Peel
With Welfare-to-Work having brought a rash of new job seekers onto the market recently, analysts have been expecting jobs growth to actually slip. Not so.
Employment increased by 31,900 in August, exceeding expectations of a 17,500 increase. Employment growth for the year is now 2.6%, which is above the average over the current economic cycle. The participation rate increased from 65.0% to 65.1% and the unemployment rate remained at a 30-year low of 4.3%. Again, almost all of the gain came from full-time employment (up 29,100). TD Securities notes this is a sign that firms are trying to extract as much working hours as possible from their employees.
A November rate rise is rapidly becoming a lay-down misere, as far as TD Securities is concerned. Only a return to financial market instability and clear signs of a US economic slowdown can stop it now. Other economists are more inclined to suggest February, given the election, although RBA governor Stevens has stated that an election won’t stand in the way of necessary monetary policy changes.
TD Securities suggests strong job growth is putting the onus on the supply side to catch up, and catch up fast. But as the RBA has pointed out, the supply side is not infinitely elastic. Soon there will have to be inflation felt in labour costs. It comes down to just how many welfare-to-workers and new immigrants there are to fill the gap.