A surprise of sorts from the Australian jobs market, while in New Zealand, the country’s Reserve Bank decided to join the club of central banks that have paused in their rate cutting to see the impact of their rapid loosening of monetary policy.
The good news is that the surge in Australia’s jobless didn’t happen, or rather, it did, but was offset by a surprise rise in the number of new part-time jobs, and by the appearance of thousands of people looking for work..
The Australian economy in fact shed a net 1700 jobs in the month, which was again a surprise given the forecasts for the loss of 20,000 to 30,000 jobs.
More people joined the ranks of those looking for work; and were actually responsible for the rise in the unemployment rate from a revised 5.5% in April to 5.7% in May.
That was the bottom line from yesterday’s May labour force figures and a surprising example of optimism that helped produce the sharp rise in consumer optimism this week.
In fact the one point to be made with certainty from the figures from the ABS is that the Australian labour market is not as stricken by recession as America’s, or Europe’s, or Japan’s.
Just as our economy continues to bumble along in low gear, but at rates well above those of our major trading partners (except China), our labour market is healthier than those offshore.
Whatever anyone makes of the rise in the unemployment rate to the 5.7% level of April is that it isn’t the 9.4% of the US.
The 5.7% figure was right on the forecast from the market, which was widely tipped by one and all.
The figures include a revision in the April jobless figure to 5.5% from the initial 5.4% reading.
America’s jobless toll in May increased by just under 350,000, an ‘improvement’ from the more than half a million toll in the previous four months.
Australian employment fell by 1,700 to 10,793,100, according to the ABS figures, with full-time employment dropping by 26,200 to 7,643,100 and part-time employment down by 24,500 to 3,150,000.
The number of people unemployed jumped by 27,200 to 651,200 as the number of people looking for full-time work increased by 30,000 to 482,600 and the number of persons looking for part-time work fell by 2,800 to 168,600.
The fact that the April figure was bumped up, and the strong showing in part-time jobs and the return of people to the ranks of the unemployed, looking for work, are both positives for the economy and for employment.
The AMP’s chief economist, Dr Shane Oliver said:
"While unemployment rebounded pretty much as expected to 5.7% in May, after April’s hard to explain fall to 5.5%, the big surprise was that employment only fell by 1700 jobs in May.
"In other words the main factor driving the rise in the unemployment was a rise in the size of the labour force rather than a fall in employment.
"From the peak in employment last October so far only 24,200 jobs have been lost.
"This is a long way from the 6 million jobs that have been lost in the US over the last 18 months, highlighting Australia’s far better economic performance."
The April figure now looks less like an aberration and we are now back to the level of March.
The figures support the notion that the domestic economy remains weak and going nowhere, while the export economy is not too strong.
But they do not support the contention that Australia is headed for a surge in unemployment above 9%; not on the current data.
The strong rises in business and consumer confidence in the reports from the NAB and Westpac/Melbourne Institute this week were surprises, so was the rise in the number of people looking for work.
No doubt some commentators will emerge to forecast gloom and doom: the drop in national income and another fall expected in our terms of trade from the lower iron ore and coal prices will have an impact; but it will be an impact shared with offshore owners of the companies and mines.
In fact a peak unemployment rate of 8% could be a real possibility (provided there’s no significant weakening in employment in coming months, or there’s not another dip in offshore economies).
The NAB no longer sees the economy contracting by as much as it did a month ago because of the better than expected first quarter growth figures, nor does it see unemployment rising sharply. It sees a peak of around 8% now.
Commodity prices have jumped sharply, especially oil, copper, lead, zinc and aluminium (all at five or seven month highs) and the lows of December-January seem a long way away.
The stronger Australian dollar will hurt export returns, putting pressure on some companies and on our balance of payments (but easing the debt burden).
But it will also help push inflation lower as it trims the rise in oil prices.
And that opens the way for another rate cut because the RBA now says a further slide in inflation will see it consider cutting rates from the 3% level they are now at.
The ABS said the under utilisation rate rose 1% in the last three months to 13.4%, but even in this measure, Australia is well under that of the US where the rate was 16.4% in May.
Macquarie Group interest rate strategist, Rory Robertson said in a commentary yesterday on the labour force figures that the Australian labour market continued its trend deterioration in May, broadly as expected, with a 26k drop in full-time jobs alongside a
