Australia | Apr 08 2010
By Chris Shaw
The Australian labour market recorded another solid performance in March, with employment rising by 19,600 jobs. Full-time positions drove the improvement in rising by 30,100, while part-time positions fell by 10,600.
Westpac notes the outcome was in line with market expectations, while it viewed the breakdown of the data as solid given the 30,000 rise in full-time jobs was the seventh monthly rise in succession.
The disappointing element of the data, according to CommSec chief economist Craig James, was a 0.6% fall in hours worked, as this followed a 2.2% increase in February.
On the back of the data Australia's unemployment in March was unchanged at 5.3%, as an increase in the labour force of 23,800 people was offset by a minor fall in the participation rate to 65.1% from 65.2% previously.
According to James, jobs creation in Australia is largely matching the number of new job seekers, a trend he sees as consistent with a healthy amount of caution on the part of employers. While businesses are increasing work hours for existing staff and selectively taking on new employees, there are still no wholesale increases in hiring.
In the view of ANZ Banking Group senior economist Amber Rabinov the pace of monthly job gains from September of last year to January of this year was clearly unsustainable. This suggests the moderation in the past two months is a sign labour demand has moved to a more stable path.
James agrees and suggests the Australian jobs market will remain healthy over the next three to four months, though with businesses now needing to remain active to keep existing staff happy there is scope for higher wages and pressure on margins going forward.
In James's view, this is possible because labour, finance and raw material costs are creeping up at the same time as consumers are still scouring for discounts and are unwilling to pay higher prices for goods. This is likely to keep some pressure on margins and profits.
Looking ahead, Westpac suggests the level of spare capacity in the existing workforce is likely to support only a gradual downtrend in Australia's unemployment rate from here. The bank expects the rate will approach 5.0% this year.
In terms of any impact on interest rates from today's data, ANZ's Rabinov suggests the moderation in jobs growth since February to a more sustainable pace gives the Reserve Bank of Australia (RBA) some breathing room to assess the data in coming weeks.
Rabinov sees the RBA holding steady on rates at its May meeting. The expectation is for the next 25 basis point hike to come in July, though an increase in June remains a possibility.
Westpac notes the market's view of the timing of the next likely hike is unchanged on the back of the data as today's release saw no change to current pricing of a 40% chance of a rate hike in May. The data saw a quick dip in the Australian dollar, but the currency quickly rebounded. Westpac continues to suggest any dips in the currency are likely to be well supported by fresh buying.
