It looks like recent strength in Australian employment growth will continue in the months ahead with job ads recording another impressive increase in July.
According to ANZ Bank, total advertisements jumped 1.5% to 177,879 in seasonally adjusted terms, leaving them up 12.8% on a year earlier.
Job ads have now increased in each of the past five months, leaving them up 6.5% since the beginning of the year.
Based on recent analysis from jobs website Seek, much of that increase was likely driven by continued strength in demand for casual workers. The group said that new advertisements for casual workers grew by 17% in the 12 months to June this year, outpacing smaller increases for temp, part-time and full-time workers over the same period of 9%, 6% and 4% respectively.
An impressive pickup in anyone’s language, and one that suggests that recent strengthening in the Australian economy is leading to improved demand for workers.
“Recent data has shown a clear improvement in labour market conditions consistent with elevated business conditions, profitability and capacity utilisation. In particular, the strength in full-time employment and a solid increase in hours worked are quite encouraging,” said David Plank, head of Australian economics at ANZ.
“Broadly, forward indicators and survey based measures point towards near-term jobs growth in the order of 15-20,000 per month.”
Job growth of that magnitude would see Australia’s unemployment rate — currently 5.6% — push lower as a consequence should labour market participation levels hold at current levels.
While another strong lead indicator on the outlook for hiring levels, Plank says that recent strength in Australia’s official jobs report will likely moderate in the period ahead.
“Several challenges remain and we expect the pace of improvement to moderate over the medium term,” he says.
“First, the level of underutilisation remains high and business surveys suggest that it is likely to fall only gradually. Second, the drivers of growth over the next few years look to be less labour intensive given the slowdown in housing construction and the expected contribution of labour-lite LNG exports to growth. We also don’t expect the recent strong pace of public sector jobs growth to continue.
“Lastly, despite the improvement in labour conditions, wage growth is sluggish and is expected to remain so.”
Though the lead indicators point to the likelihood that Australia’s unemployment rate will continue to edge lower over the second half of the year, levels of labour market underutilisation — a figure that includes both unemployed and underemployed workers — remains high, a factor that many believe will keep a lid on wage pressures despite stronger labour market conditions.
According to figures released by the Australian Bureau of Statistics (ABS) in May, private sector wages — the largest employing sector in Australia — grew by just 1.79% in the 12 month to March 2017, the lowest level on record dating back to when the survey first began in 1997.
Combined with a 2.33% increase in public-sector wages over the same period, the year-on-year increase for all workers — at 1.87% — was also the slowest pace on record.
Markets will receive updated wage data from the ABS for the June quarter later this month.
Given the importance of wage growth in helping to underpin household spending levels and bolster inflationary pressures, this release is arguably one of the most important to watch in terms of the outlook for official interest rates from the Reserve Bank of Australia (RBA).
According to analysis from TD Securities, a pleasant surprise could be in store for workers in the months ahead.
“We see the next two wage price index (WPI) reports not only putting an end to ‘record low wage growth’ headlines, but expect wage inflation to pick up towards 2.5% per annum by Q3,” said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, citing a recent large increase in Australia’s minimum wage rate at the start of July.
“The recent 3.3% annual rise in minimum wage growth — the strongest since September 2011 — implies that by Q3 2017, services sector WPI could rebound at least 2.5% if not 3% per annum.”
The June quarter wage price index will be released on August 16. That will be followed a day later by Australia’s July jobs report on August 17.
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