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Sluggish jobs no smoking gun for RBA

Well, today's unemployment figure certainly is a surprise, not because it rose to 5.4 per cent but because that was the number predicted by the average market economist - a rare win for the crystal balls.

The labour force statistics have been notoriously unpredictable in their detail but the broad story remains unchanged: the Australian labour market is soft, as everyone knows, and the unemployment rate is likely to drift modestly higher, as it has, as the number of people of work force age increases, which it is.

The December figures don't change that story however tempting it is to make the worst of the seasonally adjusted dip in total employment. For a start, those seasonally adjusted numbers jump around too much from month to month to set your policy compass by.

CommSec's James Craig puts December's seasonally-adjusted fall of 5500 jobs into some perspective by pointing to the upwardly-revised increase in November jobs of 17,100.

It's easier to let the Australian Bureau of Statistics do the smoothing for you. The hugely-unreported trend series also shows unemployment at 5.4 per cent, steady on an upwardly-revised November count, but there were still 7000 more jobs created than lost in December to make 11,541,500 Australians in work - just  1per cent more than in December 2011.

Treasury and the Reserve Bank have both forecast the unemployment rate to be around 5.5 per cent by md-year. Mind you, they forecast it would be that by the middle of last year as well - a difficult and complicated beast for everyone to forecast, that labour market.

Understandably, the federal opposition will make the best (or worst) of the figures but both sides of politics remained committed to tightening fiscal policy and therefore doing nothing directly for job creation. And the coalition carries the perception burden of the Campbell Newman's Queensland example of slashing the public service - with an unemployment rate of 6.2 per cent, Queensland is second only to little recessed Tasmania.

Thus "doing something" about the labour market remains the Reserve Bank's problem as our economy continues to restructure. The reaction by the cooler heads today is that the latest figures are not of themselves enough to make a change to the RBA's outlook.

For example, Craig James:

"The latest jobs data is no smoking gun [to justify a rate cut]. Rather the Reserve Bank will look to the improving conditions in the global economy, rising share markets, healthy house prices and may hold off on cutting rates in February.

It's clear that the job market isn't shooting the lights out but by no means is unemployment soaring. In a big picture sense the job market is in a holding pattern with a modest degree of softening."

None of this is any comfort for those people very publicly losing their jobs, but the reporting of redundancies here and closures there don't provide an accurate picture of how the economy is faring. If it did, the impression is that Australian unemployment must be of European dimensions. The labour market is soft, but not quicksand, as it deals with the growth in the working age population.

The RBA believes the working age population is growing by 1.7 per cent - in keeping with the overall population growth outlook in this space for some time.

As reported elsewhere on this site, Commonwealth Bank senior economist Michael Workman makes the point that the RBA's anticipation of this level of unemployment is what has driven the current cycle of cutting interest rates.

"Over the past year, jobs were up about 148,000, on average of about 12,000 a month, and that's just not enough to meet the next entrants to the jobs market, which are about 15,000 to 16,000 [people] a month," Mr Workman said. "We don't think these are the kinds of numbers that would induce a rate cut from the RBA soon.

"We believe that they've been indicating for six to nine months while they cut rates that these were the kinds of outcomes they were expecting on the jobs market. So we've ended up with a 3 per cent cash rate because of the expectation that this was going to happen."

The question for the central bank's February meeting then isn't what unemployment was in December, but what impact low rates are likely to have on encouraging investment and building as the year progresses.
It's a tricky business predicting RBA interest rate movements too.

Michael Pascoe is a BusinessDay contributing editor


  • As always, great to have a non partisan political analysis of information so open, and subject to being, twisted and warped to suit political ends, thanks.

    Date and time
    January 17, 2013, 2:20PM
    • Some advise. Take whatever Mr Pascoe says, throw it out the window, and do the complete opposite to what he trumpets. It is all very well to try and talk things up constantly and so bullishly, but eventually you have to realise where we are really at or you get burnt badly. His constant talking up of the housing market and proclaiming there is no bubble is the perfect example of only pushing personal agendas. I do hope he is interviewed in another 12 months and his articles read back to him.

      Date and time
      January 17, 2013, 2:46PM
      • I've just taken a printout of your post to read back next january.Mr Pascoe has got as good a chance as you of grabbing the wooden spoon when the results of the Nostrodamus of the Year Awards are announced next year.(Refer to yesterday's report about a cat thrashing investment managers in a stock picking competition).

        Date and time
        January 17, 2013, 3:41PM
    • Lies, bigger lies, and then there;s statistics!

      The real number is not the jobs, but the salaries being paid. That is what the economy lives on.

      I would like to see the average wage lost, and then the average wage employed. That, I am sure will show a big gap, which in turn effects everything from retail, property etc moving forward.

      Headline numbers are far too big to count for trends, but this analysis will show that the average wage will be dropping, and that my friends is a huge impact on tax revenues, and the like for the future

      The Abyss
      Date and time
      January 17, 2013, 3:09PM
      • Again the media prints the fairy story of a 5.4% unemployment rate, this is after company closure after company closure and mass layoffs after massive layoffs. The real unemployment rate is 19.2 % (unemployed and underemployed - Roy Morgan research) and the media should do their job and not accept the Feds fudged figures at face value.

        Date and time
        January 17, 2013, 3:46PM
        • The unemployment rate is a false figure of 5.4%. The real unemployment rate is more like 15%, as the 5.4% rate does not include mum's on single pensions looking for work, a couple with a partner working and a partner not working as the partner working supports the unemployed partner hence cannot get Centrelink payments. People underemployed working at least 1 hour a week but want more work hours. Unemployed people who have assets eg a big bank balance cannot claim Centerlink. Again, the above people are not included in the unemployment stats.

          Date and time
          January 17, 2013, 4:15PM
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