31 Jul 2017

Economic growth strengthens labour market

2:01 pm on 31 July 2017

The relative strength of the economy is expected to be reflected in the second quarter labour market report, due out on Wednesday.

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Growing demand in the construction sector has seen wages lift over the past year. Photo: 123.rf

The consensus is for employment growth of 0.7 percent, or more than 15,000 jobs, in the three months ended June, which is just under half the number of jobs created in the first quarter. The strongest growth is expected in the hospitality and building sectors.

Westpac senior economist Satish Ranchhod said economic growth is underpinning a solid labour market. But record immigration means growth in the labour force is matching job creation, which will limit any fall in unemployment.

"While that's not high, it's not really low either... this strong rise in labour force participation has moderated the decline in the unemployment rate."

He said the jobless rate is expected to be unchanged at 4.9 percent.

The expanding work force is also keeping a lid on wages, which are expected to have grown by 1.6 percent in the year ended June.

"There are some sectors, like construction, where growing demand has given wages a bit of a lift over the past year. But even with the economy now into its seventh year of continued expansion, we're yet to see a broad-based lift in wage growth," Mr Ranchhod said.

He said the relatively muted labour market picture - steady employment growth and subdued wages - would back the Reserve Bank's approach of keeping the official cash rate unchanged for possibly the next two years.

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