It won’t cause the Reserve Bank to change its mind, but it is another statistic that will not lessen its heightened fears over inflation and possible wages breakouts.
The jobs market is strong, and fat wage deals being done in Victoria by the state government and a wages campaign being threatened by the state’s unions will only add to the Bank’s scepticism about inflationary pressures.
We know activity in the building and retailing sectors, traditionally two areas where the slowdown or the surges first show up, are easing. But we also know the booming resources industry is about to get a massive cash injection from higher prices, while rural Australia is possibly looking at its best season in three years.
So the bank would have been hoping for a sign that the slowdown had reached the labour market. It didn’t in April.
Today the RBA produces its second Monetary Policy Statement of the year: the first was hawkish on inflation and up to a month or so ago, this report would have been more relaxed. That’s now not as likely.
The latest figures from the Australian Bureau of Statistics show positive jobs growth in April.
But the slight rise in the unemployment rate to 4.2% from 4.1% in March was because more people were looking for work.
In fact the number of new jobs was more than double the market estimate: 25,000 vs. a 10,000 estimate: a sign the gathering slowdown has not hit employment or the ability of employers to keep hiring people.
It was the 18th consecutive month that we have seen a growth in jobs in Australia.
The ABS said that the number people employed increased by 25,400 to 10,712,900 in April while the number of people unemployed rose 16,900 to 469,800.
Since March the unemployment rate has edged up from a 33 year low of 4% to April’s 4.2%, a small sign of the impact of the slowdown being seen in retail and building, but not enough to convince the Reserve Bank that inflationary expectations will be depressed by rising job losses.
The number of people in the labour force has risen 40,000 since March, while the number of people unemployed is up by just over 20,000 people
The rise in the unemployment rate to 4.2% came from a small rise in the male unemployment rate to 4.0% and a 0.2% rise in the female unemployment rate to 4.5%.
The participation rate rose to a near record 65.4%, meaning there were more people confident enough to be looking for work. The Reserve Bank would prefer to see the participation rate easing as people are discouraged from looking for work by the slowing economy.
The news comes on top of poor building approvals for March and indifferent retail sales for the same month.
The April jobs figures are the first indicator we have had from the current quarter and although employment lags as an indicator, the RBA will want to see a rise in the number of jobless and a fall in the job creation going on in the economy. Jobs growth grew at a strong 2.9% in the year to April.
The RBA would probably like to see what is happening across the Tasman where the New Zealand’s employment fell by the most in 19 years in the first quarter.
The unemployment rate rose to 3.6% from 3.4% in the December quarter, according to figures from Statistics New Zealand. When taken with other indicators showing falling home sales, slowing exports but still high levels of inflation, the Kiwi economy seems trapped in a nasty inflationary spiral that is heading downwards. (See accompanying story)
And upmarket department store chain, David Jones produced lower than expected third quarter sales figures yesterday.
The retailer said third-quarter sales revenue rose 3.8%, reflecting the slowing pace of consumer spending. The growth was under the 4.2% annual rise in headline inflation in the quarter.
The company said sales revenue for the three months to April 26 was $453.3 million from $436.7 million a year earlier. Sales growth in the same quarter of the previous year had been 8.4% and more than 9% in the first six months of the current financial year.
On the important like for like (or same store sales) comparison, DJs said sales grew at 2.3%, which was OK but well under the sharper growth seen in the first half to the end of January of 7.3%.
CEO Mark McInnes said, "Our 3Q08 Sales performance reflects the slowdown in consumer spending that we were anticipating and had started to plan for more than 18 months ago. Our business is in good shape and we are well prepared for the expected continuing environment of softer consumer demand."
Mr McInnes said there had been a significant deterioration in consumer confidence as interest rates rose and the financial services sector came under pressure.
"There has been a significant deterioration in consumer confidence as interest rates have increased and the financial services sector has come under increasing pressure. Our guidance for the second half of 2008 and fiscal 2009 has factored this in."
And in a sign the slowdown in new home building is taking a toll, building products group, Boral yesterday downgraded its 2008 earnings outlook.
Boral revised its guidance for net profit to the bottom end of a range from $234 million to $256 million. It earned $298 million in 2007
Boral blamed the continuing slide in the US housing market and bad weather both there and on the Australian East Coast.
