Wage pressure rises as job market tightens

Employers are facing increasing wage pressure in light of the latest Dun & Bradstreet Business Expectations survey, which shows employment expectations are at their highest level in more than seven years.

Last month, D&B surveyed 1,200 business owners and senior executives across major industry sectors in Australia.

The survey shows employment expectations have risen two points to a net index of 11 points, while executives reported an overall easing in expectations for sales, profits, inventories and capital investment.

Meanwhile, the unemployment rate for December 2010 was 5% and is expected to fall further during 2011.

According to the survey, 27% of companies expect wages growth to be the primary influence on their business this year, up 2% from the previous month.

According to Dun & Bradstreet chief executive Christine Christian, the survey shows there are signs of capacity constraints emerging in the economy, particularly in light of the Queensland floods and Cyclone Yasi.

“Overall, the signs are positive for the economy. However, the increasing demand for labour and the expected impact on wages does point to some capacity constraints and if this continues it is likely to eventually show up in inflation,” she says.

“Business executives must be attune to these emerging constraints and seek to limit the impact on margins.”

According to the report, competition for labour – particularly skilled labour – and the subsequent wage pressure will most likely affect business conditions towards the middle of the year as executives report an overall easing in business expectations after recent highs.

The news comes as the latest ANZ Job Advertisement Series shows the total number of jobs advertised in major metropolitan newspapers and on the internet rose by 2.4% in January, following a 1.2% increase in December.

As the 12^th consecutive monthly rise in total job advertisements, the figure is now 40.5% higher than a year ago, which is the highest annual growth rate recorded since the inclusion of internet job advertisements into the series in July 2000.

ANZ estimates the effect of the Queensland floods reduced national job advertisements by almost 1%.

Ivan Colhoun, ANZ head of Australian economics and property research, says even with the inclusion of the Queensland floods, the 2.4% rise in job advertising in January is a relatively healthy result.

“This suggests Australian labour demand remained reasonably solid in the latter months of 2010 in spite of some patchiness in a number of sectors of the economy,” he says.

With regard to January’s labour force data, to be released by the Australian Bureau of Statistics on Thursday, Colhoun says ANZ forecasts a decline in the employment rate from 5% to 4.9%.

“While the intense flooding in Queensland will significantly impact many Australian statistics over the next few months, these influences will… be largely transitory,” he says.

“The RBA has stated that it will look through these effects in determining policy. ANZ expects that the RBA will leave interest rates unchanged until the third quarter of this year.”