Australian employment came in much stronger than expected in October while the jobless rate edged higher as more people sought work, suggesting the RBA may have more to do to cool demand and inflation.
As Warren Hogan said: The RBA released updated economic forecasts less than a week ago which were finalised on 7 November – 9 days ago. They forecast employment growth in Dec 2023 of 2.5%. After todays labour force numbers they need employment to fall by 10k in each of November and December to achieve this. If you use quarter average YoY then you need an even bigger fall – something like a net fall of 50k in Nov/Dec. either way the economy keeps surprising on upside and their models will be screaming higher rates. It is their judgement and/or the board that is holding rates down.
On the other hand, a Sluggish increases in hours worked and declining job ads suggest that demand for workers is weakening along with the economy. Given record growth in the working-age population, something will have to give.
That said, Markets largely shrugged off the data. “Today’s figures don’t provide enough of a ‘smoking gun’ for a follow-up rate hike at the December board meeting and that seems to also be the market reaction,” said Diana Mousina, deputy chief economist at AMP Ltd.
“Another rate hike is still a possibility for February 2024 after the next round of quarterly inflation data, but we think the macroeconomic environment will be weaker” by then, she said.
New RBA Governor Michele Bullock recently described the labor market as “not as tight as it was,” noting that some leading indicators such as job vacancies have begun to ease from high levels.
But when you examine the data, we have more questions than answered, and as I discussed on my Tuesday live show, I wonder if the data as presented by the ABS really portrays the current state of employment. My surveys suggest that people are grabbing extra hours and jobs where they can, to help alleviate the costs of living, and of course with population growing thanks to high migration, we need at least 22,000 new jobs each month, just to stand still.
My best guess is the ABS is not picking up the huge immigration surge quickly enough. It is clear the labour market has dramatically loosened. As I say, something will have to give.
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