The June quarter Consumer Price Index data is out tomorrow. Market forecasts are for a quarter-on-quarter rise of 0.5% (compared to 0.4% in the March quarter) for an annual rise of between 2% and 2.2%, with the underlying figures of 0.5%/1.9% annual unchanged. Those sort of numbers would be exactly what the Reserve Bank expects; as it said in the minutes of its July board meeting, “progress towards a lower unemployment rate and an inflation rate closer to the midpoint of the target range was likely to be gradual”`. But if there’s a bigger rise than expected, watch the monetary policy galahs at the Financial Review and in academia renew their campaign for a rise in interest rates — or, as the Reserve Bank recently implied, “instability”.
Last week’s June Labour Force numbers confirmed that, despite the large jump in seasonally adjusted terms in new jobs (50,900 and 27,000 in trend terms), the strong employment growth of 2017 is well behind us. The trend growth in jobs in 2017 was an annual 3.3%, but by June it had slowed to an annual rate of 2.0% — which is now the average for the past 20 years. In the six months to June, 123,800 jobs compared to 207,000 in the first six months of 2017, and sharply slower than the rate that gave us 406,600 jobs (on a trend basis) in all of 2017.
Those are still good jobs numbers — but unlikely to be sufficient to really drive the unemployment rate down or lift wages growth. As the NAB’s Chief Economist Alan Oster noted in the bank’s quarterly survey of business conditions and confidence “wages growth is likely to remain broadly similar over the rest of 2018 as in the first half. So while our baseline is for the labour market to tighten and wages growth to pick-up, there is an emerging risk of slowing employment growth and lower resulting wage growth acceleration.”
Over at AMP, Shane Oliver has a similar view:
We remain of the view that with mixed readings on economic growth, low wages growth and inflation and falling home prices in Sydney and Melbourne an RBA rate hike is unlikely until 2020 at the earliest, and that the next move being a cut cannot be ruled out … With jobs growth not cutting much into the 13.9% pool of unemployed and underemployed workers its hard to see wages growth picking up much any time soon … Solid jobs growth is providing a source of support for total household income in the economy and hence consumer spending, but its being offset by ongoing soft wages growth and along with falling home prices the outlook for consumer spending is likely to remain constrained.
It’s a frustrating period for everyone. The galahs want a tightening of monetary policy that the RBA won’t give. The RBA wants to see wages growth and inflation pick up before it moves. The government wants voters to be grateful for the strong jobs growth it has presided over. Businesses want households to spend more but they’ve cut their savings to the bone. And it’s frustrating most of all for workers, who keep being told how wonderful everything is when most of them are going backwards in their real pay.
So I had a quick look at the definition of a ‘job’ at the ABS site.
It includes those who worked in one week: for one hour or more for pay, profit, commission or payment in kind, in a job or business or on a farm; or worked for one hour or more without pay in a family business or on a farm.
If, including the grossly under employed market, the trend growth rate is only 3.3%, I’d hate to think what the full time employment rate is, you know the 35 to 40 hour a week job, which at $20/hr is already difficult to live on.
And these are the figures Turnbull has been crowing about? LOL.
Bref, I asked ABS employment survey staff why they used the absurd definition of “employed” one hour or more of paid work per week. They said it was an international standard. If they used a different standard international data comparisons wouldn’t be comparing like with like.
How convenient for our politicians. I’d still like to know the full employment rate, and I think our media should always include them when discussing employment rates so politicians can’t pull the wool over our eyes. So how about it Crikey?
Possibly (though I doubt it) one could use a combination of the ABS categories –
workforce being those between 16-67 not in full time education, subtract official U/E (aka “actively seeking work”), and then ask WTF those couple of million people are doing for a crust.
Not all would be politicians, apparatchiks and vatbred pod people from the IPA.
The rate you’re probably looking for is the “extended labour force underutilisation rate” which doesn’t seem to be updated too regularly and was at 15.4% last year.
…and, as that is an average, imagine how depressed many areas in Australia must be, not that one would know it from the upbeat announcements from Turnbull and lack of information from the opposition or media. So much for keeping the bastards honest.
Thanks for that category & figure – it’s uncannily like my guestimate too.
That is a lot of unused spending capacity in the glorious consumerdom being warehoused.
For what future purposes?
The RBA has painted itself into a corner. Given that the hold being put on investor interest only loans has had a significant effect on house prices (SydMel particularly) it makes it clear that credit supply is the biggest contributor to house price growth.
With most people hocked up to their eyeballs in debt, the slightest of increases in interest may well lead to recession.
The RBA will be walking a tightrope for years into the future, and I think they know it.
And that doesn’t take into account increases in interest rates on loans entirely outside the RBA’s controls, via changes to funding costs for the banking sector.
And that doesn’t take into account the volume of interest only loans that are due to expire and be replaced with interest and principle loans.
Too many variables, too much complexity. We’re likely stuffed.
AMP’s, Shane Oliver defines the total % either unemployed or underemployed seeking more hours, as at 13.9%, let’s make that 14% allowing for margin of error and better communication.
Thanks Yclept below – the “extended labour force underutilisation rate” was evidently 15.4% last year.
It is refreshing to see just a few commentators now publicising this rate, the total % either unemployed or underemployed seeking more hours.
BUT when are we going to see a commentator publicising the ACTUAL NUMBERS OF PEOPLE that are unemployed / underemployed. Approx 720,000 are unemployed. Why isn’t the human number of people out there being quoted as often as the % rate and in the public consciousness as much as the unemployment rate?
If a minimum of 14% to 15% are un/underemployed, why don’t commentators give us the number of humans that are yet to find a job (forget reliable job) or suitable income in our society?
Are 1 million people’s lives poorer or badly affected ? 1.2 million? 1.5 million? Now we are starting to see the magnitude of the problem, shock, horror.
So even when our political history shows unemployment does not change votes, commentators are still shy about telling us the actual numbers of people affected ……..sigh.
And this in a country with almost unfettered rising cost of living, negligible rental regulations and no social housing network. We must be the 2nd stupidest country in the OECD.