'Remarkable' jobs growth raises hopes for wages

It's easy to get caught up in all the bad news about low wage growth, which is bumping along at a similar pace to inflation, leaving consumers with little extra spending power.

But here's some brighter news on the labour market to balance the bad: there is something of a jobs boom under way.

More jobs have been created in 2017 in net terms than any year since 2005, with 371,000 new net jobs so far this year, according to analysis from National Australia Bank economist Tapas Strickland.

What's more, much of this has been driven by full-time work - reversing one of the key weaknesses of recent years.

Further signs of an improving jobs market also can be seen in recent surveys taking the pulse of businesses.

Employers are having the most trouble finding staff since 2008, according to a recent survey from NAB, especially in the economically strongest states of NSW and Victoria.

While businesses often complain about how hard it is to find staff, because this means they are forced to pay more or train people, difficulty finding the right employees points to a market where workers are starting to get back their bargaining power.

The industries where employers were having the toughest time finding appropriate staff were in personal services, finance, property and construction, the report said.

Separate data from employment search giant Seek also suggest there are fewer job applications arriving for every available position.

And recent official figures show there were the most vacant jobs on record, with the lowest number of unemployed people per unfilled position since 2012.

That is all positive news, but what's the catch?

Well, if the labour market was getting much tighter, we would expect to see significant falls in the unemployment rate, and people would start to get bigger pay rises. This isn't happening, yet.

The unemployment rate has only fallen from 5.7 per cent to 5.5 per cent in 2017, and there is little evidence wage growth is picking up from its record low pace of 1.9 per cent.

Even so, some economists are increasingly confident there is a genuine recovery taking place in the labour market, and that should eventually flow through into healthier pay rises.

Treasury's secretary John Fraser recently said the growth in employment this year had been "remarkable," in stark contrast to 2016.

He conceded he had taken a "scolding" for the budget's forecast that wage growth would recover in the coming years, but stood by the view all the same. The reason? Because even though we have been through years of weakness, there is still a business cycle - natural ups and downs in economic activity.

"We haven't uninvented the business cycle," Fraser said.

"Just as wages slowed in response to the period of slower growth and the slack in the labour market in recent years, we expect a period of stronger growth and falling unemployment will lift wages in the next few years. It will take time."

The RBA as also said it expects wage growth to increase "gradually" - though it admits this isn't happening yet.

Another feature of the jobs growth that stands out is the strong expansion in full-time jobs growth among men. This may confirm anecdotal evidence that construction and other workers who lost their jobs when the mining construction boom ended have increasingly been hired in other industries.

All of these indicators bode well for wage growth eventually rising, but even the more optimistic forecasters, it won't happen for a while. One reason for that is that wages are typically one of the last economic indicators to rise in response to stronger growth.

There is hope on the horizon for stronger growth in pay - but it's still a fair way off.

This story 'Remarkable' jobs growth raises hopes for wages first appeared on The Sydney Morning Herald.