Fall In Job Ads Shows Rates Policy Is Working
The Age
Tuesday July 8, 2008
THE first signs of a slowdown in Australia's drum-tight labour market are appearing, with indications the high interest rates are certainly working. The two indices of employment published today, from ANZ and Seek, show that the number of new jobs being advertised is falling rapidly - potentially indicating the strong rate of employment could be about to end. The ANZ index, which charts jobs advertised in major metropolitan newspapers and online, revealed a 3% decline for June, the second fall in two months, following May's 1.7% decline. The slowdown has been most pronounced in newspapers, with job ads down 18% from June last year. The Seek measure, which charts only online vacancies as a ratio to applications, showed the seventh consecutive decline, with advertisements down by 5.1%. The two unofficial employment figures are usually a sound indicator of where the Australian labour market is headed. The unemployment rate is published on Thursday and economists predict another 20,000 jobs could have been wiped during June, following on from May's soft result when employment fell by 19,700. The result was the first negative reading since October 2006, and sparked the theory that the labour market had peaked. Most economists have predicted the jobless rate for June will remain at 4.3%, as the participation rate (which measures the overall size of the labour market) ticks up once again. JPMorgan's chief economist, Stephen Walters, said he believed the moderation of economic activity would translate into few jobs being created. "Job growth is expected to stall in June, given the recent string of soft domestic economic data," he said. "In particular, business confidence was very weak in the first five months of the year, meaning that firms have probably reined in, or postponed, their hiring intentions." Walters said that since the middle of last year there had been 230,000 new jobs and the unemployment rate, while it has ticked up to 4.3%, was still historically low. ANZ's head of interest rate research, Sally Auld, said while the domestic jobs market would slow in the next few months, a hard landing of the employment rate was not expected. "The risk may be that persistent skills shortages could encourage firms to hoard labour," she said. "This would ensure that while labour market conditions soften, the slowdown in employment growth and the rise in the unemployment rate will be reasonably measured." The forecast drop in employment strength could prolong the Reserve Bank's stint on the sidelines for monetary policy. Economists believe the RBA will remain in dovish territory and elect to keep interest rates on hold at 7.25% for the rest of this year. The one potential trigger for policy action will be whether wage demands are kept in check. So far the evidence of this is mixed. Union claims for wage negotiations vary, with some claims pushing for increases of more than 20%. The RBA has been comfortable so far, with yearly wages growth in the order of 4%, but this level is now in danger. Unions have forecast wages growth of 5% in the year ahead, well ahead of inflation and the current growth rate. "Wage growth has so far remained contained, but the risk is skewed to the upside," Walters said. "Labour market conditions remained tight for an extended period but the industrial disputation under way in some industries, including education, law and medicine, may result in wage rises to compensate for high and rising food and energy prices." There is little the Federal Government can do to control wage negotiations in the private sector than apply moral pressure to unions and employers. The state governments are facing a conundrum, particularly in NSW, where it seems almost the whole public service is facing new wage agreements. The Labor State Government has maintained a responsible line, with pay rises of about 4% so far. Despite this, the NSW Government now faces chaos, with train drivers yesterday voting to strike on July 17, the peak of World Youth Day and the day the Pope tours Sydney. The onus is on the Government to hold firm on granting pay rises.
© 2008 The Age