SYDNEY Reuters -- Australian employment raced ahead in December as the unemployment rate fell to its lowest point since 2008, showing strength that should help the economy cope with the current surge in coronavirus cases across the country.
Employment jumped 64,800 in December, topping market forecasts of a 43,300 rise and adding to November's record jump of 366,000.
The unemployment rate fell to 4.2%, down from 4.6% in November, the lowest reading since August 2008, when the unemployment rate fell to 4%. To get a result under 4% you had to go back to the 1970s, according to the ABS.
After years of sub-par gains, investors have reacted by nidging the local dollar up to $0.7228 on wagers of an early rate increase from the Reserve Bank of Australia RBA which has been trying to drive unemployment to 4% or lower.
This month, as a surge in new Omicron cases spooked consumers away from shops and restaurants and spooked distribution systems, as workers fell ill or isolated, the blistering growth in jobs hit a speed bump this month.
The most recent hit has been to hours worked rather than to employment, with analysts estimating hours might drop 3 -- 4% over January, though layoffs could come if the outbreak continues through February.
Demand for labour remains strong, with job advertisements easing only modestly in December after a run of stellar gains to leave them 33% higher on the year.
The government on Wednesday waived the cost of visas for students and backpackers who want to come to Australia and work part time.
The evidence so far is largely anecdotal, but analysts believe that demand is finally stoking wage growth.
The data on wages for the fourth quarter is not out until Feb. 23 and may not show much of a pick-up due to the inertia baked into the pay system in Australia.
The last measure of wages showed growth of just 2.2% a year, compared to 4.8% in the United States and 4.9% in the UK.
The RBA has argued that interest rates will not need to increase from their record low of 0.1% until 2023, even though the U.S. Federal Reserve seems ready to raise rates in March.
Markets are wagering that a tightening will occur sooner, perhaps as early as May due to the persistence of global inflationary pressures.
The data on Australian consumer prices for December quarter is due next week and some economists believe that core inflation could jump to its highest since 2009, at 2.5%, which adds to the case for an early rise in rates.
Bill Evans, chief economist at Westpac, predicted that an increase would come in August, a major shift from his previous call of a first move in February next year.
Evans said that our forecast revisions reflect a much faster lift in inflation and wages growth than anticipated. In August we expect a hike of 15 basis points to be followed by a further hike of 25 basis points in October.