Weaker housing construction could impact employment growth down the track
GUEST OBSERVER
Australian employment rose by a stronger than expected 37,400 in April taking annual jobs growth back up to 1.6 percent. Coming on the back of a 60,000 gain in March this is much better than expected.
Full time jobs declined by 11,600 so the quality of jobs growth was poor but this followed two strong months of full time jobs growth.
Unemployment fell to 5.7 percent as the participation rate was unchanged and remains in the same range it’s been in for 18 months.
The strength in jobs growth is to be welcomed and suggests that jobs growth is heading back towards the solid pace indicated by forward looking jobs indicators (like job ads, vacancies and hiring intentions from the NAB survey).
As combined in our Jobs Leading Indicator these forward looking indicators continue to point to strong jobs growth ahead (although it has been overstating jobs growth a lot lately).
Implications
April’s jobs data is consistent with Reserve Bank expectations and so on its own is consistent with interest rates remaining on hold.
The risk though is that weakness in retail sales (on the back of subdued consumer confidence and weak wages growth) and weaker growth in housing construction will start to impact employment growth down the track.
Fortunately, forward looking jobs indicators are continuing to hold up at present suggesting reasonable jobs growth ahead.
Shane Oliver is AMP Capital's Head of Investment Strategy and Chief Economist. You can follow him on Twitter here.