Last week we highlighted that the demand for employee solicitors had surged by 20% over two years. Taking a closer look we can see that the spike has occurred this year.

What is the cause?

It is now more than 14 months since the Reserve Bank reduced the official interest rate to 1.5%. We have had more than five years of steady or downward-moving interest rates.

Inflation has been under control and wages growth has been meagre. The federal government does not appear to be in a hurry to reduce its deficit spending.

All these factors and more have been pushing the economy forward.

Low wages growth in recent years has made labour even more attractive. Hence we have a hiring boom. Of course, it does not mean that employers are going to find people with the skills they are looking for. A lot of money spent on job advertising will fail to produce results.

The trend line suggests that overall, law firm employment demand increases when the economy grows. There might be some counter-cyclical fields such as family law and insolvency but on the whole, law firms benefit when economic activity increases. 

Commenting on all occupations, employment website Seek says that it is the best conditions for candidates in seven years.

The view from SEEK

Michael Ilczynski, Managing Director for SEEK Australia and New Zealand, says conditions are favourable for job seekers with new job ads in August [2017] reaching a seven-year high.

“These positive trends in advertising on SEEK point to an improving labour market and suggests that positive economic momentum, evident in the June quarter National Accounts GDP Report, is continuing into the second half of the year,” says Ilczynski.

“Advertising trends continue to be very positive in NSW (up 7.4% year-on-year), Victoria [up 15.5% year-on-year], South Australia (up 19.5% year-on-year), and the ACT (up 3.6 % year-on-year),” says Ilczynski. “In these regions, the number of job ads on SEEK have all recovered to their pre-GFC levels.”

Tasmania and the Northern Territory recorded the strongest growth in job ads on SEEK in August, although Ilczynski says the results were coming off a low base. The island state notched up year-on-year growth 33.8% while NT recorded a 23.7% lift over the same period.

The promising news continued for Queensland where the labour market has been recovering in since April. Advertising for the state on SEEK grew by 20.3 per cent year-on-year in August and trades and services remains its top advertising industry, recording year-on-year growth of 44%.

“In WA, conditions were weaker but still positive, with job ads on SEEK up 14.8% year-on-year,” adds Ilczynski. “Fuelling this growth was strong advertising across mining, resources and energy (up 52% year-on-year), trades and services (up 26% year-on-year) and healthcare and medical (up 6% year-on-year).

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What happens next?

What will trigger the Reserve Bank to bring the interest rate party to an end? The one thing that it can never ignore is inflation. It is the rate of inflation that has once again become the critical signpost for all things in the economy. Wages growth, to the extent that it adds to inflationary pressure, might create the tipping point for the next major turn in the economy.

© 2017 Legal Practice Intelligence