As we approach 2011, the Australian economy continues to throw up paradoxes, as we saw yesterday.
It’s no longer a matter of a two speed economy in Australia, more like multi-speeds.
The economy slid close to negative growth in the September quarter, retail sales fell in October and remain weak and yet we saw 54,600 jobs created in November (despite an interest rate rise) and the highest level ever of participation, meaning more people are more confident about their job prospects.
The reported rise was more than double the 20,000 median market forecast, although some analysts had suggested a figure as low as 12,500 and others were double that.
And yet, it doesn’t necessarily mean a rate rise is on early next year.
In fact the continuing strength of the labour market has come as a shock to many analysts who believe the sluggish retailing climate is bad news for employment.
But the resources investment booms in Queensland and Western Australia (and slowly spilling into other states) has not been derailed and is soaking up labour month after month, oblivious to what is happening elsewhere in the domestic economy.
This investment boom is what’s worrying the Reserve Bank, not so much the slowdown in retailing, which it believes is caused by a large and continuing spike in saving by still cautious consumers.
Overall, November’s figures mean 162,000 new jobs were created in the past four months, when the economy slowed (and non-farm GDP fell 0.2% in the September quarter).
In fact, half a million new jobs since November of last year (yes, 500,000).
And yet gloom and doom abound in many sections of the domestic economy.
The ABS figures showed that Australians are being employed at near record pace and are now so confident that they are emerging from the ranks of the under-employed to look for work.
The ABS said unemployment rate fell to 5.2% from the 5.4% in October as the number of people employed rose by 54,600 to a record 11.417 million people.
The rise in employment was driven by an increase in full-time employment, up 55,100 people to 8.033 million; that was slightly offset by a tiny fall in part-time employment, down 400 people to 3.384 million.
The number of people unemployed decreased by 19,500 people to 627,800 in November.
The ABS seasonally adjusted monthly aggregate hours worked series showed a rise in November, up 0.7 million hours to 1,603.1 million hours.
The ABS reported the highest level of labour force participation in November of 66.1%, a rise of 0.1 percentage point from October.
All the states except Tasmania posted a drop in their unemployment rate with NSW reporting a rate of 5.1%, (from 5.4% in October); Victoria saw its jobless rate ease to 5.5% from 5.6%.
Queensland saw a small improvement with the rate down to 5.5% from 5.6%; in South Australia it eased to 5.6% from 5.7%, while in WA the rate fell to 4.5% from 4.7%, the lowest among the states.
But in Tasmania, the unemployment rate ticked up to 5.4% from 5.2%. In the ACT the rate was a very low 3.1% last month.
The AMP’s Chief Economist, Dr Shane Oliver wrote:
"News of a continuing strong labour market appears to be at odds with the soft patch in GDP growth evident in the September quarter and other indicators of softer growth.
"Either the labour market is yet to catch up to the slowdown in the economy or the labour market strength may be telling us that the September quarter GDP data exaggerates the slowdown or that employers regard it as temporary or some combination of all of these.
"Whatever the explanation, the RBA is likely to regard the labour market report as an aberration for now and so it doesn’t change our assessment that interest rates will be left on hold for some months to come.
"Supporting this view are forward looking indicators of the labour market, such as ANZ job ads and employment intentions in the National Australia Bank business survey, that suggest that employment growth will slow down to around a 2 to 2.5% annualised pace in the months ahead.
"However, the strength in the labour market is likely to ensure that the RBA retains a tightening bias as it underpins continuing very strong growth in household income which sooner or latter could translate into stronger retail sales and secondly it adds to the risk of an acceleration in wages growth putting pressure on inflation.
"So while the November labour market report is unlikely to change the rates on hold message for the next few months, it remains consistent with further rate hikes from the June quarter next year."
But as reported below there was more bad news for investors from retailing with The Reject Shop, revealing a shock profit downgrade and saw its shares monstered by investors who have grown increasingly worried about the shopping sector (see accompanying story).
The downgrade by The Reject Shop would tend to confirm that and comes after downgrades from Harvey Norman and poor sales figures from Harvey Norman, Premier (Just Jeans), Myer, David Jones and JB Hi-Fi.
At the same time Australians are saving at a rate not seen for decades; the national savings rate hit a seemingly too high 10.2
