Something is not adding up in Australia, or Australians are exhibiting behavioural patterns never seen before.
The economy slid close to negative growth in the September quarter, retail sales fell in October, and remain weak and yet today has seen 54,600 jobs created in November (despite an interest rate rise) and the highest level ever of participation, meaning more people are confident about their job prospects.
That’s 162,000 new jobs in the past four months, when the economy slowed, (and non-farm GDP fell 0.2% in the September quarter). Half a million new jobs since November of last year (yes, 500,000).
And yet gloom and doom abound in many sections of the domestic economy.
The ABS figures showed that Australians are being employed at near record pace and are now so confident that they are emerging from the ranks of the under employed to look for work.
The ABS said unemployment rate fell to 5.2% from the 5.4% in October as the number of people employed rose by 54,600 to a record 11.417 million people.
“The rise in employment was driven by an increase in full-time employment, up 55,100 people to 8.033 million,” that was slightly offset by a tiny fall in part-time employment, down 400 people to 3.384 million.
The number of people unemployed decreased by 19,500 people to 627,800 in November. The ABS seasonally adjusted monthly aggregate hours worked series showed a rise in November, up 0.7 million hours to 1603.1 million hours.
The ABS reported the highest level of labour force participation in November of 66.1%, a rise of 0.1 percentage point from October.
And this morning one of the sharpest operators at the bottom end of retailing, The Reject Shop, revealed a shock profit downgrade and saw its shares monstered by investors who have grown increasingly worried about the shopping sector.
The company blamed the November rate rise for the downgrade. As a result, the company has revised down its full year NPAT expectations for FY2011 from the earlier $26 million to $26.5 million; to between $21 million and $22 million.
The shares fell by over 22% in a matter of minutes before the fall stopped.
And earlier this week hard-headed investors substantially ignored a big fund-raising associated with a restructure of the Australia and NZ shopping malls owned by the Lowy family’s Westfield Holdings. Instead of raising $3.5 billion from shareholders and the public, only $2.1 billion was raised, a huge 41% shortfall, given the support the Lowy name usually has from the big end of the market.
The word from investors is that they have gone all cautious on retailing stocks. The downgrade by The Reject Shop would tend to confirm that and comes after downgrades from Harvey Norman and poor sales figures from Harvey Norman, Myer, David Jones and JB Hi-Fi.
At the same time Australians are saving at a rate not seen for decades, the national savings rate hit a seemingly too high 10.2% in the September quarter, according to the National Accounts from the Australian Bureau of Statistics.
And last night the Reserve Bank’s chief economist, Phil Lowe, who oversees the central bank’s forecasts, told a dinner in Sydney that this savings caution by consumers was lasting longer:
“It is difficult to know what the right answer is, but the restraint being exhibited by the household sector is turning out to be quite long-lasting. In preparing our own forecasts, we have, for some time, been assuming that the household saving rate stays high for quite a while yet. If this were to occur, not only would it lead to a lowering of risk in household balance sheets, but it would reduce inflationary pressures during the period of high investment.”
That means the Reserve Bank is coming to the view that the longer this high level of saving continues (i.e. and the high level that consumer caution continues) then the pressure will be taken off the need for rate rises in 2011 and beyond.
This increased propensity to save is coming, as Lowe pointed out, at a time when consumer confidence is high in Australia, not low, as in the US where the savings rate has risen, but is only at half the Aussie level.
This paradox is not showing up in the various consumer confidence surveys and should be addressed.
Glen
Below is something i wrote about six weeks ago on employment/unemployment – it is still revelant and might help answer (or atleast add to the debate) as to what is happening here….it was titled “fiddling the books”
There were close to 300,000 full-time jobs created across Australia over the last twelve months. The unemployment rate remained steady at about 5% or close enough to full employment. Heady stuff, and somewhat hard to believe.
What I am scratching my head about is, where are the jobs coming from? If you examine the economy, the overall readings for most industries and larger sectors are not that promising. The two-speed economy headline does not cut the mustard and in fact is overstated; mining contributed only 7% of our GDP last financial year.
So what’s up? Are the employment statistics incorrect? Or is there something else going on? Well yes, the ABS figures are maybe not the best measure of employment downunder, as you only need to be employed for one hour a week to be statistically employed and the monthly labour force survey, it might surprise some, covers just 0.33% (or just 29,000 homes) of the Australian population aged 15 and over.
Yet, what the ABS does measure (albeit poorly, perhaps) once you look deeper at the data and in particular at the more-detailed quarterly releases – which often don’t get much airplay – is quite telling.
Under-employment remains high, with close to 860,000 Australians, despite being employed, not having enough work. The problem is widespread, with only Western Australia and the two territories doing better than the Australian average. One in eight employed Australians needs more work. This is constraining consumer demand.
About a third of the 300,000 full-time jobs created last year were in government. This is almost twice the long-term average, which over the last 25 years has been running at 18%. Queensland – but also South Australia and New South Wales – has been fiddling the books, so to speak, of late with almost all of these states’ new full-time work being housed in government departments.
Yesterday, I again witnessed employment for employment’s sake. It takes, apparently 13 workmen, all decked out in new government clobber, to dig a hole near my office – the same hole, by the way, that they dug out a few weeks back. It also takes four, yes four, Queensland Rail employees to change one light blub at Brisbane central station. Jokes have less content. Meanwhile, and in contrast, the Queensland construction industry – which directly employs one in eight Queenslanders – lost 24,000 full-time jobs in the last two years.
Something has to give.
Might there be a new factor in the equation? Perhaps due to the GFC, and the unpredictable effects of climate change, people have lost confidence market investment and are instead salting their money away to cover their mortgages.
The posited property bubble might also mean that people are salting their money away as they can’t necessarily rely on their house selling for more than they paid for it, if they lose their jobs, or should some other disaster arise. Given the posited bubble, there might also be fear about buying investment property.
The only safe generalisation one can make about Australians is that they will prioritise hanging onto their home over everything else. Being an Australian myself, I think this is pretty sensible.