The Australian dollar turned down overnight, despite the second lot of official monthly figures showing the Australian labour market is much stronger than anyone had thought.
The news indicated that the economy has once again surprised everyone (including the Reserve Bank?) by generating a large number of new jobs in April, according to the Australian Bureau of Statistics.
The dollar jumped back over $US1.0240 yesterday after the release of the jobs figures, from around $US1.0180 before the data release. That meant the loss after Tuesday’s rate cut surprise has disappeared.
But overnight, it turned lower and was trading around $US1.068, down more than a cent as the US dollar rose past 100 yen for the first time in four years. The US dollar also rose against the euro and sterling – and the euro rose against the yen, as did the Aussie dollar.
Global sharemarkets lost ground, or marked time. Wall Street ended a touch lower, as did gold and oil. Our market will open uncertain on Friday as a result. The jobs report puzzled investors yesterday and left investors uncertain.
The jobs figures saw the unemployment rate at 5.5% in April, down 0.1% from the reported 5.6% reported for March. The jobs data will now throw into doubt expectations for future rate cuts from the RBA which left that option clearly open.
In fact whatever trepidation the RBA had on Tuesday in recommending the rate cut would have been answered by this jobs report.
Another strong jobs report baffles markets
The sharp improvement in job creation this year could be a factor in the 3.2% annual growth in retail sales now being enjoyed by the sector (up from 2.5% in 2012).
Could that be behind the improvement reported by JB Hi-Fi last week and in the March quarter sales report from Harvey Norman, as well as better numbers from Coles and Woolworths?
April’s strong rise (in both full and part time work) totalled 50,100 and followed the loss of 36,100 in March, more than 71,000 new jobs in February and 10,400 new jobs created in January (all seasonally adjusted).
That means around 95,000 new jobs have been created in the first four months of this year, or an annual rate of more than 260,000, if the trend continues at the current pace, which seems hard to believe given all the talk about a slow economy and growth expected to be under 3% (annual) for 2013 as a whole.
The reported number of new jobs was well above forecasts from the market and for the jobless rate to have remain flat at 5.6%.
Some economists expected what they called a "modest’ rise after the big fall in March, but nothing as large as the 50,100 reported. Now economists will wait for the May figures to see if there are any revisions to these figures (there wasn’t after the big February increase).
And, smoothing out the monthly swings with the trend data, the solid rise is still there with the number of new jobs last month jumping 46,000. From the 11.541 million people employed last December, the trend growth has also been 95,000 – or well over a quarter of a million new jobs (annualised).
That is not the look of an economy battling headwinds. According to the ABS, the 11.646 million people in work at the end of April was up 161,800 from the end of April 2012. And the participation rate is up a fraction. But because the working age population has grown by around 1.7% in the year, the number of unemployed rose by 68,700 to 682,900.
The ABS reported the number of people employed increased by 50,100 to 11.66 million in April. "Both full-time and part-time employment increased, with full-time employment up 34,500 to 8,159,700 people and part-time employment up 15,600 people to 3,503,500. The increase in total employment was driven by increases in part-time and full-time employment for both males and females."
The jobs figures, which were supported by the rise in hours worked of almost 11 million in April (very strong) and a rise in the participation rate of 0.2% to 65.3%, tells us that either the economy continues to grow, despite all the gloomy talk of sluggish demand, the downturn in resource investment, weak housing finance and approvals and the fall in retail sales in March.
And inflation remains mild – mild enough for the Reserve Bank to have based Tuesday’s surprise 0.25% rate cut on that basis, and not an attempt to drive down the dollar (as some media writers and private economists have claimed).
And yet car sales remain solid, house prices are growing (very slowly), retail sales continue to have growth momentum despite the fall in March, the trade account has returned to the black for the first time in a year and quarter and consumer confidence remains OK. But surveys of manufacturing and construction show low to contracting levels of activity.
There appears to be something of a disconnect. The economy is not running at full capacity and the jobs market isn’t booming, but it has not collapsed and continues to show much stronger growth than anyone realises.
If this growth continues there won’t be another rate cut. And that will be good news to savers and those depending on fixed income and bank deposits.
