Employment up but consumers still cautious

Australian employment grew by more than 400,000 in the year to November 2010, according to new labour force data.

Figures show employment numbers in health have risen the most over the past year, increasing by 8.6%. This was followed by construction and the services sector.

According to ANZ economist Amber Rabinov, some industries saw a decrease in employment numbers, including wholesale trade, and finance and insurance.

“The longer-tem structural decline in the manufacturing industry has also continued, with a fall in employment of 0.4% since November 2009. No doubt the strength of the Australian dollar over the past year has further compounded the negative trend,” Rabinov says.

Meanwhile, the Melbourne Institute Survey of Consumer Inflationary Expectations for December shows the median expected inflation rate decreased to 2.8% in December, from 3.1% in November.

Melbourne Institute fellow Michael Chua says that the central bank’s increase in the cash rate on November 2 has continued to rein in inflationary expectations.

“Nevertheless, the median consumer inflationary expectations in December remains on the high side,” Chua says.

Consumer unemployment expectations also fell slightly, indicating an improvement in the labour market outlook.

According to the latest Westpac Melbourne Institute Index of Consumer Sentiment report, consumers’ unemployment expectations fell by 1.1% in December, following a rise of 0.4% in November.

Despite this, the report reveals consumer sentiment increased by just 0.2% in December, quashing retailers’ hopes of a pickup in Christmas sales as consumers continue to save their cash.

The Westpac report reveals 64% of consumers believe now is a good time to buy, but only 3.7% feel that spending is the best use of their savings; the second weakest result on record.

Westpac senior economist Matthew Hassan says there has been little or no change in the consumer caution that has restrained spending in 2010.

“The survey detail shows a subdued picture on family finances, a relatively positive attitude towards spending but continued caution on financial decisions and a less optimistic view on longer-term prospects for the economy,” he says.