Economists say jobs growth stable despite two months of weak data

Economists say the Australian job market remains relatively stable, despite job growth figures for the past two months falling short of market expectations.

While Treasurer Wayne Swan said this week he expects 1.6 million jobs to be added by 2020, and 500,000 jobs had been tipped to be created by mid-2013, only 6,000 jobs per month have been created so far this year. This is well below the average uptake of 30,000 jobs a month for 2010.

Yesterday’s job figures showed employment rose by just 7,800 in May, far fewer than the 25,000 most economists had forecast. The ABS figures follow revised job numbers for April showing a loss of 29,000 jobs in that month, largely attributed to the summer’s natural disasters.

ICAP chief economist Adam Carr says the strong labour market is still strong, but Australia is in a bit of a lull.

“It’s clear the job market has slowed. That’s obvious,” Carr told SmartCompany this morning.

“Jobs growth last year was never sustainable. If that continued, we’d have an unemployment rate of 3%.”

Carr says many people overlook the real reasons for the job lull, namely the recent natural disasters in Australia and Japan.

“You can’t use disaster-distorted data to make an accurate assessment,” he says.

“We saw imports drop by 40% from Japan. When you consider Japan is one of our largest trading partners, this means things have quite clearly slowed down.”

Chief economist Westpac, Justin Smirk, said more than 200,000 jobs being created in the second half of 2010 led to unrealistic expectations for this year. So far, only 31,000 jobs have been added in 2011.

“The softer job numbers we have experienced through 2011, even making an allowance for the natural disasters, suggest we may be experiencing a correction to labour hoarding seen in the second half of 2010 when 200,000 new jobs were added, while the demand profile was suggesting something closer to 100,000 jobs were needed,” Smirk said in a statement.

Carr expects the resources boom to kick start jobs growth this month and the rest of the year.

“Current predictions are indicating between 15,000 and 25,000 [new jobs] for June. Retailing has picked up and business investment is robust so all indicators are that jobs growth will pick up from this lull.”

Chief economist for CommSec, Savanth Sebastian, says the lower-than-anticipated job figures means interest rates are likely to hold in the short-term.

This week, the Reserve Bank kept the cash rate at 4.75%, for the seventh consecutive month.

“The latest result cements our view that the Reserve Bank has no immediate need to be lifting rates,” Sebastian said.

“More importantly, our wage growth has not been excessive and as such CommSec believes that the Reserve Bank would be comfortable with the current interest rate settings.”