The jobs market continues to be one of the more perplexing points of contention in the Australian economy.
This week in finance:
- Labour force data expected to show around 20K new jobs, but unemployment stuck at 5.5pc (Thursday)
- Federal Reserve expected to raise rates by 0.25 percentage points (Wednesday US time)
- Mini reporting season sees Myer set to announce a big write-down on its assets on top a 40pc fall in profit (Wednesday)
Jobs growth has soared — around 400,000 new jobs created in the past year — while wages growth and the unemployment keep plodding along the same uninspired path.
A new set of jobs numbers out this week are not expected to change perceptions.
The consensus view is another 20,000 or so new jobs and the unemployment rate will be stuck around 5.5 per cent.
The year kicked off with a solid 16,000 jobs in January. It was more than double that in December.
Unemployment ticked down, but that was largely due to a fall in the number of people looking for work, or the so-called participation rate.
The NAB has sniffed the breeze coming through its respected business survey and suggests jobs growth might be softening.
The business conditions’ employment sub-index is still solid, but tracking well below what would normally deliver the average 35,000 new jobs a month over the past year.
“Taken alongside our internal leading indicators, which have been much softer this month, we are looking for a below-market jobs growth of 8,000,” NAB’s Kaixin Owyong said.
The NAB view is that softer employment growth is likely to mean a lower participation rate, and that means unemployment is unlikely to come down in the short-term at least.
It has been seven years since the unemployment rate last ventured under five per cent and it is difficult to see how it will get back there if jobs growth slows.
An unemployment rate stuck in the mid-5 per cent rut along with elevated rates of underemployment — workers who would like, and are available to work, additional hours — is behind the well documented weakness in nominal wage growth.
“There are a few reasons for it [weak wage growth], but the primary one is that there is plenty of spare capacity in the labour market which reduces the ability of employees to negotiate pay rises,” CBA’s Gareth Aird said.
It becomes even more problematic when you consider a lot of the heavy lifting is done by government spending, not the private sector.
“From a growth rate perspective, public sector employment rose by a whopping 7.6 per cent per annum while private sector employment was up by 2.6 per cent,” Mr Aird said.
“Clearly, the headline employment growth figures have been flattered by growth in public sector jobs.”
That demand differential between public and private has also translated into marginally higher wage growth in the public sector.
Government spending has also propped up aggregate consumption, with real government spending growing at around four per cent over the past…