Westpac: Shortage Of Workers Remains a Major Headache

Westpac estimate that the “unemployment rate remained at 3.3% in Q4. If so, this would mean that unemployment has held at more or less the same low level for a year and a half straight – as good an indication as any that the economy has hit the wall in terms of spare capacity.”

• “While surveys suggest that hiring intentions are starting to ease off from their highs, the shortage of workers remains a major headache for businesses. We expect a 0.3% rise in employment for the quarter, partly helped by the return of migrant workers.”
• “Despite a tight labour market and a surge in the cost of living, wage growth remained fairly modest in 2021. But it picked up the pace significantly in 2022, and we suspect that it has further to go. We expect another 1.1% rise in the Labour Cost Index for the December quarter, which would lift the annual growth rate to 4.1%, topping the previous high of 4% that it reached before the GFC.”
• “The Quarterly Employment Survey (QES) measure of average hourly earnings has taken off even faster than that, rising by 7.4% in the year to September. The large and growing gap between these two wage growth measures is something of a puzzle, but both are historically high and rising, and nowhere near consistent with 1-3% inflation in the foreseeable future.”