Job ads bounce back

By BRIAN FALLOW economics editor

A rebound in job advertisements last month reversed most of the declines seen already this year and testifies to continuing vigour in the labour market.

ANZ's job ads series rose 5.6 per cent in June, seasonally adjusted, to be just 1.6 per cent below its level in January and 3.8 per cent higher than a year ago.

Auckland job ads rose 5.7 per cent, reversing May's 4.7 per cent fall, and were 5.9 per cent up on June last year.

ANZ chief economist David Drage said a gradual downward trend in job advertising had been evident since November, consistent with slowing employment growth and a slowing economy.

But the levels of job advertising, at over 30,000 on an annual basis, remained high by historical standards and, combined with unemployment close to 15-year lows, indicated a labour market that was still relatively strong.

Some evidence suggested the slowing of job growth was as much a reflection of a shortage of supply, especially of skilled labour, as of weakening demand.

"Even in those industries, such as agriculture, where growth and activity have slowed compared with the past two years there is still a shortage of labour. It's a demonstration of how deep and widespread skill shortages have become," Drage said.

"That raises questions about how much those shortages will ease as the economy slows."

There was little evidence in the Institute of Economic Research's latest quarterly survey of business opinion that shortages of skilled and unskilled labour were abating to any great extent, Drage said.

The Reserve Bank's June monetary policy statement was reasonably comfortable that few signs could be seen of significant inflationary consequences from either skilled labour shortages or high capacity utilisation and that for the time being it could rely on competitive pressures to keep a lid on inflation.

But the bank would be concerned that the longer resources were under pressure the greater the chance that strong inflationary pressure would emerge when economic growth picked up again.

An official cash rate cut of at least 25 basis points tomorrow is widely regarded as a fait accompli and Drage expects the accompanying statement to display an easing bias, especially if the bank sees much further upside for the New Zealand dollar beyond its recent volatility.

But it would be cautious about lowering the OCR too far or too fast, given continuing resource pressures in the domestic economy and signs, albeit tentative ones, of a brighter outlook for the global economy.