I am reluctant to bag and slag the employment data, because it is all we have when looking at the health of the labour market. But there are a few quirky bits and bobs in the news of the wonderful run of job creation over the past year.
Employment rose by a remarkably strong 3.1 per cent in the year to September, a fabulous result.
But, and it is a big but, the results are at odds with just about every other indicator in the economy. EIther they are misleading or the employment data are misleading.
One way to check it to have a look at the economy the last time annual growth in employment was above 3 per cent. This takes us to the period around 2007 and into early 2008.
In 2007, annual real GDP growth was generally around 4 to 5 per cent, as you would expect with such jobs growth. The economy was on fire! In 2008, the CPI surged by over 4 per cent which is again as you would expect given the boom in employment. The RBA was hiking rates at an agressive pace, with the official cash rate hitting a stonking 7.25 per cent in 2008. Wow!
While we are awaiting the release of the next batch of GDP and CPI data for updates on growth and inflation, it is just about impossible to imagine those results anywhere near 3 per cent, let alone being at a level consistent with 3 per cent annual jobs growth.
The end point?
Maybe the jobs data are distorted by sampling error or some other quirk? Maybe the economy has been booming all along, but no one knew it?
My hunch is something in between. The next round of GDP and inflation data will see stronger results, but these are from very low base levels. It is also likely employment growth will fade in the months ahead.
The economy is still muddling along with pockets of good news and segments of poor news. That’s about it.
