Australia’s unemployment rate fell to a new 33-year low of 4% in February thanks to an unexpectedly large surge in full time jobs.
Almost 38,000 new jobs were created in January, more than double market expectations of a 15,000 rise.
Even more tellingly, these were all full-time jobs. In fact, 47,700 new full-time jobs were created, with an 11,000 decline in part-time jobs producing the lower 38,000 increase in total employment.
The tight labour market is also reflected in the latest Seek Employment Index, with new jobs advertised increasing by 0.4% in February seasonally adjusted.
New job ads are 33% higher compared to the same time last year, although they have risen only 2.8% since November 2007.
Although jobs figures are generally slow to reflect changing economic conditions, the result suggests the Reserve Bank of Australia will still need to think carefully about whether one more rate rise is required to get inflation under control.
“Despite some initial signs that the economy is slowing in recent weeks, today’s labour force data speaks volumes to the contrary,” ANZ economist Alex Joiner says.
“It is this type of strength in the economy that the RBA raised interest rates in February and March to head off, and they would be expecting to see some softer labour force numbers in coming months.”
The continuing strength of the Australian economy is also reflected in a jump in the Westpac-Melbourne Institute consumer inflation expectations survey released today.
Consumers’ inflationary expectations rose 0.1% from last month to 4.6% in March, the highest level since the index started in 1993.
The proportion of people expecting inflation above the RBA’s 2% to 3% target band rose to 64.2% from 62.6%, the highest since May 2007.
Significantly, however, there were signs in the Westpac-MI survey data that the right labour market may be reaching its peak, with consumer unemployment expectations rising 3.6%, a figure that Westpac says points to a slow-down in mid 2008.
On the markets today, share prices have returned to the downward trend, with the S&P/ASX200 down 1.8% on yesterday’s close to 5163.3 at 12.37pm.
At the same time the Australian dollar is trading at US93.88c, a figure that is likely to rise further if markets construe today’s jobs figure as increasing the chance of further rate rise.