The labour force data today rounded out a fortnight of hugely variable data on the Australian economy.
The good economic news in business expectations and conditions, housing construction and prices and rising commodity prices was offset by poor news on GDP growth, company profits, consumer sentiment and business investment. The generally weaker level for share prices is another worrying sign for the economy.
Today’s labour force data fit into the middle of the good news / poor news spectrum. Employment rose a moderate 17,000 in August, but there were revisions to recent history which chipped 30,000 jobs off the level of employment previously reported. This meant that the unemployment rate remained elevated at 6.2 per cent with the only comfort being this was one-tenth lower than the unemployment rate in July.
No competent economist would suggest the labour market is strong or indeed that there are any concrete signs that conditions will improve in the months ahead. The unemployment rate has been 6.0 per cent or higher for 15 straight months, something that Australia has not experienced for 12 years. Job creation is not keeping uo with popultion growth and job advertisements are flat at a relatively low level.
The policy risks are not clear from this mix. There may be grounds for lower interest rates and perhaps fiscal measures if the poor news dominates in themonths ahead. That said, the RBA is giving a huge weight to the current very low level of the Australian dollar as a factor that will stimulate the economy through exports and import replacement. That, with record low interest rates and decent global growth, should be underpinning better economic news. They are not which us why the market is pricing in more rate cuts and economists are climbing over each other to have the most bearish forecast for the unemployment rate.
For me, the RBA is on hold for a long time to come. We’ll see.