There is not likely to be an RBA rate cut in the near future, as jobs growth was much stronger than expected in February. But is the Australian economy out of the woods for 2013?
Now here’s a surprise for everyone to deal with, explain away, or just ignore: there were more than 71,000 new jobs added last month. No one had forecast the rise, and it exploded the gloom and doom in this story on the Fairfax Media websites headlined “Jobless rate will rise economists warn”.
According to the Australian Bureau of Statistics, not only were 71,500 new jobs added in February (seasonally adjusted), but the unemployment rate remained steady at 5.4%, as the participation rate jumped to 65.3% (a sure sign of increasing confidence by workers that there are jobs to be found). Yes, most of the new jobs were part-time, but there was a surprising number of new full-time positions filled as well. February’s increase was sharply higher than the 10,400 added in January, which in itself was something of a shock.
The ABS said in its release: “The increase in employment was due to increased part-time employment, up 53,700 people to 3,510,800 and increased full-time employment, up 17,800 to 8,117,400. The increase in total employment was driven by an increase in male part-time employment, and female full-time and part-time employment. The number of people unemployed increased by 400 people to 660,000 in February.” Market economists had forecast a rise of around 10,000 new jobs for the month. That was a big miss.
Normally such a sharp rise in part-time job creation could indicate either a feeling among employers they need to trim hours because of weakening demand, or a feeling of confidence that conditions are starting to improve. The best bet is employers are becoming more confident about their outlook, contrary to what the NAB survey of business conditions and confidence showed on Tuesday.
On a trend basis (designed to smooth out the month-to-month moves from the seasonal adjustment process), there were 42,000 new jobs created last month, while the unemployment rate remained steady and the number of hours worked rose.
The news (which also includes a sharp rise in the number of hours worked and is to be expected given the sharp rise in the number of new jobs) came a day after consumer confidence hit a two-year high. But business confidence remains low. With retail sales perking up in January (and Myer surprising this morning with a better-than-forecast profit of $87.9 million for the first half of 2012-13), car sales travelling close to record levels and house prices on the rise, you can all but rule out another rate cut from the Reserve Bank. In fact, as a headline writer at The Australian or the AFR might write, “Rate rise looms” — well maybe, but not yet.
It’s more like rates sideways for a while so long as inflation remains in the 2% to 3% band of the RBA’s target. But if it starts creeping higher, the bank will be under pressure to raise rates. The Australian dollar added about half a cent to $US1.0357 after the employment reports as issued at 11.30am, another indicator that rate cuts are off the agenda. It is, in fact, starting to look like 2013 might be a bit stronger than some forecasts have it, more like 2012 rather than weaker.
But the big question remains the toxic combination of politics, the May budget, the September election and an absence of what is needed to make sure the transition from the resources investment boom to domestic-led growth isn’t too traumatic.