Friday, November 13, 2009

Jobs are back from the abyss so...

...expect a December rate hike

Victoria is leading a resurgence in Australian employment, accounting for an astonishing 24,800 of the 26,500 new jobs created nationwide in trend terms in the three months to October.

The new figures show employers taking on workers at the fastest pace in almost two years. And in an important reversal of recent trends they show almost all of the new jobs going to men, making male breadwinners more secure.

They build a solid case for a rare pre-Christmas rate hike, an event that has happened only twice in the two decades.

An extra 24,500 Australians found jobs in October, adding to the extra 39,800 who found jobs in September.

In less-volatile trend terms employment grew 26,500 over the three months to October.

Almost 24,000 of the new jobs went to men...

The figures suggest the unemployment rate is near its peak. At 5.8 per cent nationwide and 5.7 per cent in Victoria, it is little-changed since March.

"It may have peaked already," said AMP Capital economist Shane Oliver. "Business surveys point to solid employment growth going into next year. By the second half of that year jobs growth is likely to be well above labour force growth and the unemployment rate should come down."

Other experts agree that the government's Budget forecast for unemployment, revised only last week, is now too pessimistic.

"The Budget had unemployment peaking at 8.5 per cent. The mid-year review had it peaking at 6.75 per cent. It now may not even get to my forecast of 6.25 per cent," said ICAP Securities' Adam Carr.

Increased job offers, diminishing redundancies and renewed talk of labour shortages are likely to loosen purse strings in the lead-up to Christmas as breadwinners become less worried about losing jobs.

"In effect it will be a self-fulfilling prophecy," said CommSec economist Savanth Sebastian. "We will see a pick up in retail spending and economic activity. It appears almost certain the Reserve Bank will break tradition and raise interest rates for the third consecutive month."

A third successive rate hike would add a further $46 to the monthly cost of repaying a $300,000 mortgage, a total of $139 per month since the Bank began hiking rates in October.

In Singapore for an APEC meeting Treasurer Wayne Swan played down the strength of the employment news saying "substantial challenges" remained.

"We are fortunate in Australia. But nevertheless everybody’s impacted upon by what’s happening globally, which is one of the reasons why we have to maintain the stimulus," he said.

Underscoring Victoria's strength the trend figures show it to be the only state to have boosted full-time employment. Victoria piled on an extra 5,500 full-time jobs in the three months to October at a time when every other state lost them.

Published in today's SMH and Age

Graphic: strangemaps

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