Daily Commentary BY THE CURVE TEAM –

Job Ads Surge

8th of June, 2021

Surging job ads contribute to the changing dynamics of employment and inflation.

Job ads were up 7.7% in May following weak employment numbers in April. This leaves them 38.8% higher than pre-covid levels.

Employment since the lows of covid has been incredibly strong, which has coincided with job ads rising for 12 consecutive months. As a leading indicator, strong job ads would usually be followed by continuously improving employment.

In many advanced economies though, supply constraints are being referenced, including for jobs. Despite new jobs being available, there may not be suitable people to fill the jobs or people may not be willing to accept the jobs.

This may make the usual relationship of job ads and employment weaker. It could also lead to wage pressures at higher levels of unemployment sooner than pre-covid, as employers resort to increasing wages to attract workers.

So far there is no evidence of inflation and wage pressures in the data, as these data releases lag the economy. But if wage pressures occur sooner than usual, it will take time to flow through to the data, and the RBA have said they will not change policy until inflation pressures are evident in the data.

This leaves the possibility that the RBA will move too slowly to reign in inflationary pressures should they eventuate.

Today, business conditions and confidence for May are released today. Curve’s monthly insights will also be released, which will be the final monthly before the RBA’s decision on yield curve control and QE in July.

Josh Stewart

Associate - Money Markets