By economics commentator Alex Erskine, of the Henry Thornton website

ABS reported yesterday that employment rose by 20,000 in February, up a
massive 3.4 % on February 2004. While employment is a lagging
indicator, it’s impossible with this number to believe the economy is
falling into a black hole. But note that, taken at face value, the ABS
must believe there has been a massive drop in productivity as GDP is
supposedly growing more slowly than employment. This is a question in
search of an answer.

Even though wages growth (as measured) has not yet accelerated,
declining productivity would be a serious source of inflationary
pressure. This would worry the Reserve Bank more than strong jobs
growth per se. The strong jobs data has offset the plunge in consumer
confidence to leave further rate hikes firmly on the agenda. John
Garnaut’s article in the SMH has a useful graph which shows the recent
acceleration of employment. The annual growth of 3.4 % is no stronger
than it was in 96/97 and 01/02, and in each of these episodes growth
slowed again almost immediately. Read the article here.

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