New data "rubber-stamps" higher interest rate to this new recent high
The Reserve Bank is likely to hike interest rates for the eighth straight month in December after stronger-than-expected jobs growth in October pushed unemployment back to its 48-year low of 3.4%.
Although the central bank has been aggressive in its efforts to slow the economy and tamp down skyrocketing inflation, the number of workers rose by 32,000 in October – twice what had been predicted, The Australian reported. That helped lower the key jobless measure by 0.1 percentage points to its July level of 3.4%, the lowest since 1974. The share of part-time employment dropped to 30%, its lowest level since 2013, excluding the national lockdown.
“The working-age population in Australia is more employed than it’s ever been,” said Bjorn Jarvis, Australian Bureau of Statistics head of labour statistics.
ABS data showed underemployment, a measure of Australians with jobs who would like to work more hours but are unable to find them, fell from 6% to 5.9%. The labour under-utilisation rate, which combined the unemployment and underemployment rates, fell 0.2 percentage points to 9.3%, 4.6 percentage points lower than before the COVID-19 pandemic and the lowest level since March 1982.
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The number of job vacancies essentially matches the number of people looking for a job, meaning employment growth has slowed over recent months to below the pre-COVID trend and employers are scrambling to fill advertised roles, The Australian reported.
But with a record number of people employed and thousands fewer out of work than before the start of the pandemic, experts said workers had leverage to demand further pay hikes.
Gareth Aird, head of Australian economics at Commonwealth Bank, said the latest employment numbers “rubber-stamped” a rate hike to 3.1% when the RBA board meets Dec. 6.
“The message from the labour force survey has been remarkably consistent over the past five months – the unemployment rate has essentially hit a floor and the labour market is very tight,” Aird said. “As a result, wages growth has finally accelerated in a meaningful way. The challenge now is for the RBA to cool demand in the economy such that the labour market loosens a little, but not too much.”
AMP Capital chief economist Shane Oliver shared similar sentiments.
“While the jobs market is showing some signs of cooling, the strength in jobs in October and the further fall in labour under-utilisation, which points to a further acceleration in wages growth, makes it hard to see the RBA pausing next month,” Oliver said.
