With the labour market such a pivotal issue for markets and policy makers alike, the next monthly update will be delivered by the ABS on Thursday.
The stunning lift in employment through 2017 – over 400,000 additional jobs – has been well documented and economists, including at the RBA, will be on edge for signs of further strength. The interesting issue, and one that remains the conundrum, is that despite the strong gains in employment, the unemployment rate has only inched lower over the past year and remains at an uncomfortable 5.5 per cent. At the same time, underemployment remains over 8 per cent of the workforce and wages growth continues to track around historical lows. These are not the characteristics of a strong labour market.
Even the otherwise upbeat NAB survey is suggesting some pull-back in employment growth in the near term. From a monetary policy perspective, a drop in employment in next week’s data and a further uptick in the unemployment rate, both of which the NAB survey suggests is possible, would be another nail in the interest rate rate hike coffin which was dealt a severe blow with the recent inflation data and market volatility.
