- Quarterly jobs data showed growth in high-paying sectors rose 9% y/y, the highest level since 2006.
- There was also a decrease in the number of new low-wage jobs.
- However, Morgan Stanley says strong jobs growth is still unlikely to translate into a broader pick-up in wages.
If you’re already earning a tidy pay packet, there was some good news in this week’s employment data for the August quarter.
Data from the ABS showed jobs growth in Australia’s highest paying sectors rose to the highest level since 2006.
However, analysis from Morgan Stanley indicates that wage pressures are likely to remain subdued despite continued strength in the labour market.
On the jobs front, MS said employment growth in the three months to August had been “broad-based”.
Gains were led by the manufacturing sector (+86,000 y/y) and mining (+33,000 y/y), while the retail sector lost 10,000 jobs.
Data from NAB early this month showed that a mini-resurgence in the mining sector was creating pockets of labour market tightness, particularly in WA.
More broadly, Australia’s economy added the most jobs on record in 2017, and steady job gains this year have left the unemployment rate hovering near a six-year low.
Along with the quantity, there was also in increase in quality.
“Jobs growth in the occupations with the top 25% of wages is running at around 9% in annual terms, the highest since 2006,” MS said.
In contrast, there was a decrease in the number of new low-wage jobs from the same time last year.
That represents an encouraging dynamic compared to the 2017 trend, when a significant percentage of jobs growth was driven by low wage jobs.
“All else equal, this mix effect of jobs should have a positive impact on incomes,” MS said.
The data adds an interesting layer of complexity to the outlook for wage growth, which has become a key talking point with respect to economic growth and inflation.
Despite a healthy jobs market, Australia’s benchmark wage reading — the Q2 wage price index — showed broader wage growth remains stuck well below the long-term average.
However, Morgan Stanley’s proprietary Job Quality Index (JQI) still paints a less rosy picture when it comes to prospects of a long-awaited pick-up in wages.
The JQI collates 15 different labour market data series, and is designed to adjust for cyclical changes and “only capture structural shifts in the labour market”.
Its core function is to calculate the probability that higher jobs growth and lower unemployment will translate into higher wages.
And the latest data point showed a downturn in the readings for “job casualisation” and “demographics”.
“This suggests that there may be fewer wage pressures going forward than what the decline in the unemployment rate over the past few months would typically suggest,” MS said.
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