Job surge reignites debate on stimulus



By Sid Maher

A surge in full-time jobs, which pushed unemployment to a 16-month low of 5.2 per cent in May, has reignited the political row over the pace of economic stimulus withdrawal.

The number of full-time jobs jumped by 36,400 in May, while part-time jobs fell by 9400 in a result that bettered market expectations and cut the unemployment lines by 0.2 per cent or 25,400 workers.

While Employment Minister Julia Gillard said the government’s stimulus remained “vitally important”, opposition Treasury spokesman Joe Hockey said with unemployment approaching 5 per cent, the Reserve’s Bank’s measure of full employment, there was a real risk of overheating the economy unless stimulus were withdrawn.

TD Securities analyst Roland Randall said the labour market continued to show considerable momentum — adding 26,900 jobs — and it was only a matter of time before the unemployment rate fell below 5 per cent.

“Already at or close to full employment, there are significant capacity constraints likely to emerge and manifest in highest wage claims and eventually accelerating inflation,” Mr Randall said.

The average number of monthly hours worked increased by 2.9 per cent or 43.9 million hours, but the participation rate dropped slightly by 0.2 per cent to 65.1 per cent.

Unemployment fell in every state except Victoria, which was at 5.4 per cent (from 5.3 per cent) and Tasmania at 6 per cent (5.9 per cent).

NSW fell to 5.2 per cent from 5.7 per cent; Queensland 5.5 per cent (5.6 per cent); South Australia 5.3 per cent (5.6 per cent); Western Australia 4.1 per cent (4.6 per cent); the Northern Territory 2.9 per cent (3 per cent); and the ACT 3.3 per cent (3.4 per cent).

Ms Gillard said the figures had exceeded market expectations in almost every category and this was “great news for working families for whom the best way to put food on the table and pay the rent or mortgage is a job”.

Ms Gillard said the government’s priority was to keep Australians in work. “Which is why our stimulus measures continue to be vitally important. The gradual withdrawal of stimulus will keep supporting Australian jobs and businesses as the global recovery continues,” she said.

But Mr Hockey said there was a message in the figures for the government. Treasury had stated last week in Senate estimates that its longstanding practice had been to assume the full rate of unemployment was 5 per cent.

“We are now at the point where there is a very real risk of overheating the economy unless policy settings are returned to a neutral stance — that is, neither expansionary nor contractionary,” Mr Hockey said.

“The projected fiscal deficit in 2010-11 is $41bn, the second-biggest dollar deficit in peacetime, after this year. It is irresponsible for the government to run such a very large deficit when the global financial crisis is now clearly in the past and the economy is rapidly returning to full employment.” Further interest rate rises would be laid at the feet of the government, he said.

But CommSec economist Savanth Sebastian said while it would be hard to conjure up a better set of figures, employment was a backward-looking indicator and the latest unemployment result predated interest rate rises from March to May.

Jobs growth might be less positive in coming months, he said.

May jobless figures:

NSW, 5.2% – down 0.5pts
VIC, 5.4% – up 0.1pt
Qld, 5.5% – down 0.1pt
SA, 5.3% – down 0.3pts
WA, 4.1% – down 0.5pts
Tas, 6.0% – up 0.1pts
NT, 2.9% – down 0.1pt
ACT, 3.3% – down 0.1pt
Australia, 5.2% – down 0.2pts

Article from The Australian, 11 June, 2010.