Jobs takes: Curb your enthusiam

At one end is Westpac:

November’s headline employment gain exceeded expectations by a significant margin but we would caution before interpret this as suggesting an acceleration in labour demand. As we highlighted in our preview, the weaker than expected October print associated with a falling participation suggested that sample volatility may have been behind the soft print. As such, a bounce back in November employment and participation was to be expected. In the end the robust surge in employment, and 0.2ppt gain in participation, does suggest that positive sample volatility may have been a significant factor this month. This is why we would point to the flat unemployment rate which suggests that the labour market that is holding a robust level rather than strengthening at this point.

Nab too:

Rotation to a sample with a higher participation rate likely flattered the strong November employment survey released earlier today, according to NAB.

However, the rotation could plausibly have corrected an “under-read” from the last sample used in October, according to chief economist Ivan Colhoun.

Moreover he notes full-time jobs growth remained strong and trend employment growth of 22,000 per month remains conducive to lower unemployment.

“Overall, [it is] an encouraging report for the economy, government and RBA,” NAB’s Colhoun says, “we’ll need to see some further declines in underemployment, but if they are forthcoming, wages growth should begin to lift and the RBA will likely be able to remove some monetary accommodation during 2018.”

JPM is also cool:

JPMorgan highlights the caution with which it has approached the jobs data this year in the rollout of the National Disability Insurance Sheme (NDIS).

“Much of the recent acceleration in employment and participation is the result of hiring and participation spillovers related to the national [NDIS] rollout,” says JPMorgan economist Tom Kennedy

“Next week’s ABS quarterly employment data by industry will provide an important update on this view, with employment growth once again expected to be strong across the health and social services sectors.”

NAB remains generally upbeat about the jobs read, encouraged by consistent full-time employment growth, while JPMorgan cautions persistent wage growth stagnation will require further reductions in already low unemployment to trigger any shift in officials’ ‘neutral’ policy outlook.

Capital Economics is warmer:

Another month of extraordinarily strong growth in employment leaves little doubt about the current health of the labour market. The 61,600 leap in employment in November was well above the consensus forecast (+19,000) and much stronger than the 7,800 increase in October.

What’s more, the composition of jobs growth was very encouraging, with 41,900 full-time jobs created. In fact, of the 383,300 jobs created in the past year, 80 % have been full-time.

And while such elevated rates of jobs growth are unlikely to be sustained, most leading labour market indicators suggest growth will remain decent in the coming months. In other words, it has been a stellar year for the labour market, which should provide some support to income growth.

Offsetting this, however, the outlook for wage growth is still fairly subdued. Admittedly, the unemployment rate held steady at a five-year low of 5.4% and the strong rates of full-time jobs growth pushed the underutilisation rate down from 14.0% in August to 13.7%. All this suggests that there has been a decent reduction in slack in the labour market.

Even so, the underutilisation rate is still comfortably above its post crisis average of around 13.0%, so there is still a long way to go.

As a result, we expect wage growth will only rise from 2.0% to around 2.5% by the end of 2019. That would be well below the pre-crisis average of 3.5%, and is a key reason we expect inflation to remain low for longer than the RBA currently expects.

And Bloxo has jizzed in his pants:

Full employment here we come! Australia’s labour market is tightening up quickly, with today’s numbers showing employment rising by 62k jobs in November, taking the annual growth rate to a new cycle high of 3.2% y-o-y (the strongest rate since 2008). The other timely indicators — such as job advertisements and business surveys — suggest strong growth should continue. We expect the labour market to get to full employment in 2018.

Most of the job creation was also in full-time positions, which has meant that the hours worked is also growing strongly. Although the unemployment rate held steady at 5.4%, this was because the participation rate rose by a large 0.3ppts, to a six-year high. If the participation rate had been steady, the unemployment rate would have been at 5.1% already — which is around full employment for Australia (5-5.25%).

The key question remains whether the tighter labour market will deliver a pick-up in wages growth. We are of the view that it will and that wages growth will start to pick-up in the next few quarters. Although structural factors, such as changing technology and globalisation are weighing on wages growth, we expect the impact of the cyclical upswing, supported by stronger global growth and rising commodity prices, should drive a rise in wages growth.

Critically, for the rates outlook, the labour market also appears to be tightening up a bit faster than the RBA had factored into its own last set of published forecasts. We think this is partly tactical, as it is helpful for the RBA to be dovish, given that inflation is still below target.

No change for me. A decent labour being overrun by supply and supported by temporary fiscal stimulus with no trend change in wage growth coming.

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