Aussie economy added 30,000 full-time jobs

Aussie economy added a further 30,000 full-time jobs in March

Click here for the full Note and disclosures.

The Australian economy added 19,600 jobs last month (J.P. Morgan: zero, consensus: 20,000), taking total employment gains since September last year to a whopping 215,000. A downward revision to the 400 gain in employment in February, however, to a fall of 4,700 meant that the string of positive employment gains since September 2009 was broken. With leading indicators such as the employment component of the NAB business survey easing in recent months (see chart below), monthly employment gains will likely slow, albeit mildly, in the near term.

The gain in employment in March was driven by a solid 30,100 increase in full-time employment, the seventh straight monthly rise, while part-time employment fell 10,600. We suspect that this shift from part- to full-time work will continue as workers’ hours, which were cut significantly in 2009, are gradually reinstated. That said, we did see some payback in March in the number of hours worked. After spiking 2.2%m/m in February, worker hours fell 0.6% over the month. In on year ago terms, however, after falling consistently throughout 2009, workers’ hours have increased significantly over the last two months, rising 1.9% in February and a further 1.5% in March.

The unemployment rate remained at 5.3% for the second straight month in March, even with the participation rate falling from 65.2% to 65.1%. We suspect that the unemployment rate, which peaked in this cycle at 5.8%, will oscillate around current levels in coming months, owing to an anticipated rise in workforce participation. Small rises in the unemployment rate were recorded in New South Wales, Western Australia, and Victoria in March. The unemployment rate jumped sharply higher in South Australia, however, from 4.8% to 5.4%, although declined in the remaining states and territories.

The labour market should continue to tighten throughout 2010, particularly in the latter months of the year. The swelling investment pipeline and strong demand for Australia’s key commodity exports means that significant employment gains are likely to be recorded in the resource-rich states in 2H10. Already in Western Australia, for example, the unemployment rate is just 5.1% and in Queensland is at just 5.5%. Indeed, the latest official survey of firms’ investment intentions indicated that firms intend to boost investment 20% in the year ended June 2011, which will have substantial positive implications for employment.

Labour costs remain well contained for now, but with the economy growing around trend with very limited spare capacity, inflation pressures will build, especially as demand for skilled labour increases. This reaffirms our view that further rate hikes are on the RBA’s agenda this year. We continue to look for a cash rate of 5% by the end of the year but, with the medium term inflation outlook deteriorating, the RBA’s policy settings will become increasingly restrictive in 2011.

ENDS

© Scoop Media