The labour market is starting to catch up with the rest of the economy, as yesterday’s jobs data from the Australian Bureau of Statistics shows.
The June employment numbers were still good — there’s decent jobs growth and participation is continuing at very strong levels. But it’s clear that strong growth of the kind that got unemployment briefly down to 4.9% last year has vanished and we may be set for period of rising unemployment — vindicating the Reserve Bank’s decision to cut interest rates to new lows.
For several years now, the ABS has been urging us to keep an eye on the trend numbers for jobs, not the more volatile seasonally adjusted numbers. However, the two are now starting to line up. In seasonally adjusted terms, just 500 new jobs were created (against market forecasts of around 10,000) compared to trend figures of around 26,000 new jobs. But the ABS revised the trend jobless rate for May up to 5.2%, catching up with the seasonally adjusted jobless rate, which reached that level in April. The two are now aligned.
Indeed, June’s trend jobless rate of 5.2% was actually 5.24% and was rounded down; had it been 5.25%, it would have been rounded up and the headlines would have been very much different. Seasonally adjusted monthly hours worked in all jobs also fell by 100,000 hours in June; they rose on a trend basis, but at a slower rate than May.
The annual level of jobs growth is still above historical levels: 2.6% trend and 2.4% seasonally adjusted. But the rate of growth is softening, albeit off a high base, reflecting that the labour market is turning. AMP’s chief economist Shane Oliver reckons the jobless rate is headed back to around 5.5% by the end of 2019. He said yesterday:
We see a further slowdown in jobs growth over the next six months as the housing construction downturn flows through the economy. This is likely to see trend jobs growth fall well below the roughly 19,000 new jobs needed each month to absorb new entrants to the labour force … As a result unemployment is likely to drift up to 5.5% towards the end of the year.
That raises the question of where, exactly, jobs growth is going to come from, not merely to stop a rise in unemployment to 5.5% — which will hammer wages growth and push households into even lower spending levels — but to get it back to 5% and then push it down to the kind of levels the Reserve Bank believes will start to exert some pressure on inflation.
Construction employment has been falling over the last year and is set to contract further, as Oliver notes. Manufacturing is in deep trouble, having shed over 100,000 jobs over the last year. It’s only in services — health, education, professional services — that employment growth has been strong.
The government will be hoping the tax offsets and the RBA’s interest rate cuts will be enough stimulus. But the tax offset payments, if they’re not banked by worried households, will only help the retail sector (and foreign manufacturers of household goods). The only sector really going gangbusters — iron ore exports — hardly employs anyone. Construction, given the current state of the housing market in the major cities, will need more than the interest rate cuts to put a floor under falling employment.
That suggests infrastructure spending by all levels of government may still be needed to prevent unemployment from rising. Over to Frydenberg and Morrison, and their state counterparts, on that front.
frydenbrain has`nt got a clue about anything remotely fiscal or economic, his head is shiny on the inside as well as the outside from lack of use , recession here we come, the only thing in doubt is how scummo will manage to blame labor for his recession we did not have to have, thanks a lot all you brain dead ideologues that keep voting these corrupt illiterate imbiciles into power.
Bravo bb…my sentiments exactly!!
By one of those strange quirks of statistics, nowt to do with the real world, if the “trend jobs growth fall well below the roughly 19,000 new jobs needed each month to absorb new entrants to the labour force” is multiplied by twelve that would be very similar to the annual immigration figure, plus dodgy visa scams.
Then there are the native born to be fed, futtered & edjakated.
But, hey, how good is surplus?
Housing construction and retail are huge employers. And both are rooted.
Sharemarket still held aloft by hot air. Nobody knows quite how.
Everyone seems to know a recession is coming, if not already here, but the statistics haven’t caught up.
Yet.
I think that it was Gulbenkian, one of the Roarin’ 20s financiers who, when asked how he had become so rich despite the Depression, replied “By selling too early”.
If the ludicrous stock exchange levels of the West (forget Chibna et al – they have the same B/S problem writ large, just in another system)demonstrate anything after a decade of QE it is that we already have enough of everything – only equitable distribution is lacking.
Ergo, with no prospect or need to akshally DO anything productive anymore, that hot money has to go somewhere else it rots.
Apparently.
Like manure, money is only usueful if spread about widely.
NSW housing numbers alone are about 200,000 below the market. The price of building, with plenty of competition, is pretty well under control. The price of property is the problem and govt policy is keeping supply low.
“infrastructure spending by all levels of government may still be needed to prevent unemployment”
If this really mattered, why the recent general political endorsement of the $320 BILLION tax giveaway? Infrastructure, like public health, like public education, needs a lot more money. It is as simple as that. Not likely, given the very recent $320 BILLION tax giveaway.
Centre Alliance Senators Stirling Griff and Rex Patrick and Senator Jackie Lambie sold themselves and us for small change when they passed the second (more huge) $320 BILLION set of tax giveaways, backed in the end by Labor. Now, only weeks after that massive giveaway, we are talking of “the cost to the budget of franking credit refunds”, the “Budget cost of increasing Newstart”, and now “the lack of stimulus”!
But, but, their action is not ancient history; amongst its immediately damaging impacts is to provide the Treasurer with an excuse to do nothing as the ship sinks. Longer term, its damaging impact will hurt for the next few years, then do catastrophic damage to the services we need as the huge giveaways to the really rich cut in, exploited to excuse the large Budget cuts the morrison misgovernment has designed in. Hypocritically, they waved away that obvious certainty of equally massive cuts to services driven by their $320 BILLION tax giveaway with the throwaway line that if it really costs the Budget, Parliament might revoke them in those few years’ time! Yeah, right.
Having chosen their action, they have chosen their consequences. They should expect to be accountable for it.