Taiwan’s labour market continues to recover

The recent labour market indicators provided some good news.

The seasonally-adjusted unemployment rate dropped further by 0.1ppt to 3.7% in Feb15, crossing the bottom of 3.9% witnessed before the 2008 GFC.

According to a report by DBS, this has crossed the bottom of 3.9% witnessed before the 2008 global financial crisis, meaning that the labour market has completely recovered from the shock caused by the GFC.

The further decline in jobless rate now puts it on track to achieve a more significant recovery – to recoup the losses incurred during the 2001 economic recession triggered by the tech bubble burst.

Wage growth is also picking up amid the tightening of labour market conditions. Nominal regular wages registered 1.6% (YoY) in Jan15, a similar rate compared to 1.8% in 2014, and well above the ten-year average of 1.0%. In real terms, wage growth has risen more notably to 2.5% in Jan15, thanks to the rapid decline in inflation as a result of falling oil prices.

Here’s more from DBS:

For the full year of 2015, real wage growth of 1.5% appears attainable, assuming that nominal wages sustain the current pace of increase and CPI inflation averages 0%. The stagnancy of real wages was widely blamed as a major reason for the weakness in Taiwan’s domestic demand during the past decade.

Growth in real wages thus carries important implications for a recovery in public sentiment and the actual spending. Consumer confidence has showed an upward trend in recent months, and the retail sales data performed well. These positive developments strengthen the case that the central bank will hold rates steady when they meet tomorrow to review monetary policy. Chances of a rate cut are slim.