A surprise surge in full-time employment has driven Australia’s jobless rate to a four year low and could spark some decent growth in long-stagnant wages, economists say.
The jobless rate fell to 5.5 per cent in May, beating economists’ expectations of an unchanged 5.7 per cent, as full-time jobs jumped by 52,100 and part-time jobs fell by 10,100.
CommSec chief economist Craig James said May’s job creation follows almost 100,000 jobs added across March and April in a positive employment trend that would drive the economy forward.
“This is a result to be celebrated by consumers and businesses alike,” Mr James said in a research note.
St George senior economist Janu Chan said job ad numbers and recent business surveys pointed to healthy future jobs growth but expressed concern about the sustainability of the trend in the face of lacklustre consumer spending.
“The recent strength in the labour market is unlikely to persist over the medium term, particularly if soft conditions in consumer spending continue,” she said.
Recent official data has shown retail spending rose in April but that followed two months of flat or falling figures.
The labour participation rate, which refers to the number of people either employed or actively looking for work, rose by just 0.1 per cent in May to 64.9 per cent.
Meanwhile, the quarterly seasonally adjusted underemployment rate fell 0.1 percentage points to 8.8 per cent.
HSBC economists Paul Bloxham and Daniel Smith said the jobs figures pointed to a tightening labour market, which may signal an end to prolonged weak wages growth.
“As the labour market tightens further we expect it to start to put some upward pressure on wages growth in coming quarters,” they said.
Mr James said the surprise jobs figures meant the central bank would not be in a hurry to lift interest rates.
“But rate cuts can now be taken off the table,” he said.
Royal Bank of Canada fixed income and currency strategist Michael Turner said the RBA would now have a more comfortable view of the labour market – and its holding stance on rates – after three months of employment growth.
“This in turn will likely put a neutral stance on a more confident footing, particularly given that there are few signs of a noticeably slower housing market yet,” he said.
The Australian dollar was boosted by the news, hitting a two-month high of 76.30 US cents soon after the figures were released before falling back to 76.07 US cents at 1625 AEST.