Jobs and wages return to the spotlight in Australia as we are part of an accelerating employment boom across most developed economics that continues to surprise analysts and monetary and fiscal authorities.
The April jobs data on Thursday will give an initial look at the impact of the ending of JobKeeper on March 31 and from all accounts the impact is likely to much smaller than forecast a month ago.
The Wages Price Index for the March quarter on Wednesday though will be a very different story by again being very low.
Before then the minutes on Tuesday of the May Reserve Bank monetary policy meeting will again confirm why that weakness matters to the central bank and why that weakness will in turn keep interest rates low for longer – even if inflation worries the nervy bond bunnies.
The AMP’s chief economist Shane Oliver says the jobs figures will be better than expected given “that the number of workers on zero or reduced hours in March were around normal levels, job vacancies are very strong and the number of people on welfare payments in April actually fell”
Dr Oliver forecast in his weekend note that “we see little impact other than a slowing in the pace of job gains to 15,000 leaving the unemployment rate (steady) at 5.6%.”
That will again be a much lower jobless rate for April that the US where it edged up to 6.1% from 6.0% in March.
The March quarter’s Wage Price Index won’t be cheerful – Dr Oliver estimates a rise of 0.5% quarter on quarter for a weak annual rate of 1.4%.
That he says will be “a long way from RBA conditions for a rate hike” of wages growing at more than 3% (and a jobless rate 1% or more lower than the current 5.6%).”
Economic forecasts in both the 2021-22 budget and the most recent Statement on Monetary Policy from the Reserve Bank (out a week ago last Friday) confirm how tough it will be to boost wages above an annual rate of 3% while inflation is “sustainably” in the central bank’s target range of 2% to 3% by 2024.
The latest forecasts from Federal Treasury and the RBA both end at 2023 where inflation is estimated be around 2% and wages growth is forecast to be 2.25% – which is weaker than the 2.3% achieved in 2018 in the midst of the biggest jobs boom we have seen.
The RBA said in its most recent forecast last Friday: “The unemployment rate is expected to continue to decline over the forecast period, to around 4½ per cent by mid 2023. Consistent with this, wages growth and inflation are expected to pick up a little faster compared with the previous Statement. By the end of the forecast period in mid 2023, wages growth is expected to be around 2¼ per cent, with inflation just below 2 per cent.”
If that’s the best we can expect, getting wages up past 3% will be tough, even if the Morrison government changes its tune and supports big increases in national wage cases, which reports on Friday suggest might be about to happen.
Meanwhile London-based Markiteconomics said in a study on Thursday of last week that its global business surveys have “indicated a marked upturn in hiring in April as companies boosted activity in line with resurgent demand for goods and services.”
“As such, the data point to a substantial improvement in official labour market data in coming months.”
Markit said data from its global surveys of manufacturing and services (from over 28,000 companies in more than 40 countries), “recorded the largest influx of new business into businesses since April 2010 at the start of the second quarter.
“Service providers reported the steepest increase in new orders since June 2014 while manufacturers reported the biggest gain since May 2010.”
Markit said the surveys showed many companies struggling to cope with these inflows of new orders, lacking the capacity to supply customers on time, supply chains lengthening to an extent not previously seen in over two decades of survey history as demand exceeded supply.
“Consequently, backlogs of orders grew at a rate not seen since August 2007,“ Markit noted.
At the same time, companies’ expectations for growth in the year ahead has been running at elevated levels in recent months as economies continue to reopen from coronavirus restrictions. Optimism is running at levels rarely exceeded over the past decade.
(The National Australia Bank’s monthly surveys of Australian business tells a similar story (especially for March and April) with business conditions at record levels, as well as confidence.
“This combination of surging demand, rising backlogs of work and optimism about the year ahead encouraged firms to take on extra staff, with April seeing the largest monthly rise in global employment since December 2007.
“Among the major economies, the fastest rate of job creation was seen in the US, followed by the UK and eurozone, reflecting recent successes in controlling COVID-19 outbreaks and progress with vaccination programmes, especially in the US and UK,” Markit said.
By way of contrast, Markit said Brazil and India both reported lower employment levels during April, largely due to the further adverse economic impact from rising Covid case numbers and accompanying restrictions.
April’s jobs data here will again be solid because Covid is well-controlled here.
