Australia Adds 31,900 Jobs In August

Australia adds 31,900 jobs in August

Australia added a massive 31,900 jobs in August (JPMorgan 12,000, consensus 17,500) after adding 19,000 jobs in July (revised down from 21,800).

The growth in total employment was attributed mainly to an increase in full-time jobs of 29,100, while the number of part-time jobs rose just 2,700 after holding largely steady in the previous month. The unemployment rate held steady at 4.3%, where it has remained since May this year, while the participation rate rose from 65.0% in July to 65.1% in August.

The Australian labour market clearly remains tight. The economy has added 170,000 jobs to date in 2007 alone, leading the unemployment rate to a three decade low.

Employment opportunities continue to arise on the back of robust economic growth, with national accounts data this week showing that the economy expanded at an annual rate of 4.3% in 2Q - well above the potential growth rate. To some extent, the introduction of the government's Welfare to Work initiative (effective July 1) would have also bolstered the employment numbers in August.

The government initiative was introduced to assist some 220,000 people to move off welfare and into the work force, but only those without work, available to start work, or actively seeking work, are able to be included in the labour force.

The portion of these job seekers who have yet to enter the labour force will do so gradually in coming months as Centrelink conducts the tens of thousands of interviews required to facilitate the return of these job seekers to employment.

More broadly speaking, however, such tight labour market conditions suggest that upward pressure on wages will continue to build. Strong jobs growth, coupled with widespread skills shortages, will see the RBA on the lookout for rising wage costs, particularly given that most of the new jobs created are full-time positions.

The labour cost index recently showed that wages grew just 4%oya in the second quarter, although wages will likely trend higher (albeit mildly) in the coming quarters amid persistently tight labour market conditions. Rising wage pressure will surely unnerve the RBA given that headline inflation already looks set to breach the top end of its 2-3% inflation target range in coming quarters.

The details:

Employment increased by 31,900 in August due to a 29,100 rise in full-time jobs and a 2,700 rise in part-time jobs. The number of unemployed rose 3,600, and the unemployment rate held steady at 4.3%. The participation rate rose to 65.1% in August from 65.0% in July. Across the states, seasonally adjusted unemployment rates varied considerably: NSW, South Australia and Victoria (4.7%), QLD (3.5%), Western Australia (3.1%), Tasmania (5.3%), Northern Territory (4.6%) and the ACT (2.8%).

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