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12 Mar 2015
Australia's labour market set to weaken in months ahead - Capital Economics
FXStreet (Bali) - Daniel Martin, Senior Asia Economist at Capital Economics, shares his take on the Australian employment numbers, noting that Australia's labour market is set to weaken in months ahead.
Key Quotes
The 15,600 increase in Australian employment in February was enough to push the unemployment rate down slightly, from 6.4% to 6.3%. But the bigger picture is still that Australia’s economy is struggling to create jobs, and we still expect the unemployment rate to rise to 7% by the end of the year.
The February gain in employment was slightly above expectations (the Bloomberg median was 15,000; our forecast was 10,000), but Australia’s employment data can often be volatile. It therefore makes more sense to look at a longer time period. In y/y terms employment was up by just 1.3%, compared with an average of around 2% over the last decade.
What’s more, given that employment tends to lag changes in economic activity, we expect that the slowdown in GDP growth in the second half of last year will result in weaker employment growth in the first half of this year. Smaller rises in employment, and the resulting rise in the unemployment rate will in turn weigh on wage growth. As such, any boost to consumer spending that results from the recent drop in petrol prices will prove short-lived.
Key Quotes
The 15,600 increase in Australian employment in February was enough to push the unemployment rate down slightly, from 6.4% to 6.3%. But the bigger picture is still that Australia’s economy is struggling to create jobs, and we still expect the unemployment rate to rise to 7% by the end of the year.
The February gain in employment was slightly above expectations (the Bloomberg median was 15,000; our forecast was 10,000), but Australia’s employment data can often be volatile. It therefore makes more sense to look at a longer time period. In y/y terms employment was up by just 1.3%, compared with an average of around 2% over the last decade.
What’s more, given that employment tends to lag changes in economic activity, we expect that the slowdown in GDP growth in the second half of last year will result in weaker employment growth in the first half of this year. Smaller rises in employment, and the resulting rise in the unemployment rate will in turn weigh on wage growth. As such, any boost to consumer spending that results from the recent drop in petrol prices will prove short-lived.