Jobs Surge Tipped To Steam Along
The Age
Thursday July 12, 2007
THE remarkable growth in jobs is set to continue, with official figures to be released today expected to show an increase of up to 25,000 and unemployment remaining at a 32-year low.
The buoyant jobs market has led to increased borrowing and kept consumer sentiment at near-record highs.The median consensus of 23 economists in a recent Reuters survey was for a gain of 13,500 jobs and the unemployment rate to stay steady at 4.2 per cent.Economists expect the tight labour market will eventually have an impact on wages and increase inflationary pressures, but don't believe it will happen soon enough to spark a pre-election rate rise."History suggests that when you do have a labour market this tight, it should push up wages, but to date that hasn't happened," JPMorgan chief economist Jarrod Kerr said. "It may be because of lower productivity and the number of new entrants into the market, but we are expecting wages to accelerate into next year."ANZ's head of Australian economics, Tony Pearson, said interest rates would be on hold until after the election. He expects the unemployment rate to remain at 4.2 per cent, but believes that before year's end it will have a three in front of it. "We know there's ongoing strong demand for labour and so the unemployment rate will continue to fall in trend terms," he said. Wages had been well contained because the deregulated labour market prevented wage rises in one industry or state spreading to another, an increase in immigration, and a rise in the participation rate, especially among older Australians taking advantage of superannuation reforms, he said."All this is acting to moderate wages at a time when demand for labour is so intense. It has contained inflation overall and meant the Reserve Bank has not had to raise rates as aggressively." And with rates steady this year after last year's three increases, borrowing jumped in May. The Bureau of Statistics says Australians spent more on their credit cards and businesses borrowed more to fund investments, with total new lending up 0.9 per cent in May after a 10.6 per cent fall in April.Housing finance for owner-occupiers increased 0.2 per cent to $15.21 billion. Personal finance rose by 2.2 per cent in May to $6.7 billion. The rise was driven by a 5.6 per cent increase in revolving credit, which included credit cards and overdrafts, and offset a 1.4 per cent drop in fixed-term loans.Commercial finance grew 1.1 per cent in May to $36.99 billion, but lease finance fell 3.2 per cent to $558 million.The Westpac-Melbourne Institute's Index of Consumer Sentiment fell to 120.8 this month from 121.5 last month. Westpac chief economist Bill Evans said that despite the small drop, consumer sentiment remained close to May's near-record level of 123.9."The prosperity of the mining boom is spreading through the economy, that's why confidence is so high," he said. "Falling petrol prices, steady interest rates . . . and another record in the sharemarket last week have also helped." Mr Evans also expects strong job numbers today. "We are forecasting another 25,000 jobs . . . and we would expect to see maintenance of a low unemployment rate, although it might edge up to 4.3 per cent, driven by a rise in the participation rate."He said although he expected the consumer price index to edge higher, inflation would not be high enough to prompt a rate rise this year.LINK? www.melbourneinstitute.com
© 2007 The Age