If the jobs market can’t light a fire under wages now, it never will.
So there was some pretty hot economic data last week.
… and ironically, it’s going to make the RBA pretty chill.
So we got two key piece of data from the labour market last week – unemployment and wages.
On the jobs front, things are still scorching. The unemployment rate dropped back down to just 3.4%.
That’s still the lowest level in 48 years!
We might be getting acclimatised that that kind of number, but it’s worth remember just how phenomenal that is. I seriously never thought I’d see an unemployment rate in Australia that low again. Not in my life time.
We also know that the number of job openings remains sky-high.
It really is the best time to be a worker in living memory.
That said, wages growth isn’t particularly impressive. We got results for the September quarter last week too.
That came in a touch higher than expected, at 1.0% in the quarter and 3.1% over the year.
I mean, it’s a pretty good number. It’s the fastest annual pace of growth since early 2013.
So that’s nice.
That said, if you’re looking for evidence of a break-out in wages, it’s pretty hard to see it in these numbers.
With inflation growing at over 7%, real wages are going backwards… fast.
That doesn’t suggest that workers have the bosses pinned and are squeezing them for more cash.
Hardly.
Because really, if you were going to see a strong surge in wages growth, September would have been the quarter to see it.
Because the jobs market was incredibly tight. We also got the Fair Work Commissions ruling which gave a solid lift to the minimum wage (which fed through into these numbers).
The RBA’s rate hikes had yet to feed through into business pessimism. And immigration was only starting to reboot, which meant that the supply of labour was limited and competition in the labour market was at its peak.
So this was the quarter. If ever there was a quarter where Australia was going to see a break-out in wages, September was it.
And what did we get?
Just 3.1%.
Pfft. Rember, the RBA thinks we needs to see wages growth of around 3.5 to 3.75% just to stop inflation falling UNDER the target band!
So there is absolutely nothing to see here that’s going to frighten the RBA.
What’s more, the partial indicators we have seem to be suggesting that wages pressures have peaked – like SEEK’s Advertised Salary Index, which has rolled over:
So the RBA has to be looking at this and thinking, well, if we didn’t get evidence of a wage-price spiral in September, it’s probably not coming.
Which means we can probably back off on the old rate hikes.
And so my bet is that we probably get one more 25bps hike in December.
But that will probably be it. The RBA will probably be happy to sit on their hands at that point.
Which will give the economy, and the property market, time to point itself in the right direction again.
JG.