Yesterday’s detailed employment figures for April from the ABS add to the intrigue about whether the recession will be as deep or as long as expected, after last week’s unemployment fall and retail sales figures and yesterday’s unexpectedly positive lending data.
In short, if last week’s unemployment figures were wrong, they were wrong in a particular way, that is consistent with what the Government was trying to achieve with its stimulus packages. The geographic spread of changes in unemployment in April suggests outer-suburban and large regional centres experienced job growth over inner-city and suburban areas. Jacob Saulwick spotted this trend in Sydney but it’s also at work in Melbourne.
In inner Sydney, unemployment jumped substantially in April to well over 10% despite the ostensible nation-wide fall. But the further you move away from the Sydney CBD, the lower the increases and the greater the falls. Down 2.3% in the St George-Sutherland area. Down 1% in Liverpool. Down 2% in outer western Sydney. Down 2% in north-western Sydney. Down in the Hunter, Newcastle and the Illawarra.
The sample sizes are small and the numbers volatile – unemployment in far western NSW apparently varies between 10% and 0% from month to month, so too much shouldn’t be read into them. But in Melbourne, outer suburbs again show falls, albeit smaller, in unemployment while the inner east is up 0.8%. The trend is also apparent to a lesser extent in Brisbane, although not in Perth, where the real distinction is between unemployment falls in Perth and increases in the rest of the state.
What the numbers might suggest is that the Government’s targeting of retail and construction in its stimulus packages was very effective at lifting spending and employment, especially among low and middle-income earners in outer-suburban areas. They’re the sort of numbers packed suburban shopping centres and busy tradies might yield.
Any impact on retail will probably peak this month and then tail off as all those $900 cheques are spent or banked. But, as part of the Government’s deliberate strategy, that will complement the kick-off of its infrastructure spending on housing and schools which is now ramping up. The maintenance of the First Home Buyers’ Boost will help.
As part of the Budget, Wayne Swan was arguing that major road and rail projects funded in the Budget formed a third element of longer-term stimulus, beyond the “shovel-ready” (apologies to all who hate that phrase) infrastructure projects of shade sails for schools and insulation for homes.
As a number of observers are now pointing out, the big infrastructure spend in the Budget isn’t exactly that big a deal once existing money is taken out. The impact of the Government’s infrastructure investment is likely start tailing off from mid-2010.
The Government’s hope is that the world is starting to recover by then, replacing its artificial boost to demand with actual economic growth from trade in goods and services. It probably won’t be too apparent before a 2010 election, but there may be an uncomfortable gap in demand between the tailing off of the Government’s stimulus efforts and international growth, if the world fails to stage the sort of recovery anticipated by Treasury in the Budget.
Thus, it’s quite possible Treasury may have got it doubly wrong: growth now and next year may be higher, but growth from 2011 may be lower — a lot lower.
John Roskam in the AFR today suggested that Treasury was no longer independent, and that its forecasts were skewed to favour the Government’s agenda of forecasting a return to surplus. Roskam is correct to note that the Prime Minister’s reference to the Treasury as “independent” is self-evidently wrong. Treasury serves the Government.
But the idea that Treasury is now politically-biased toward Labor seems a trifle odd, as there aren’t too many Treasury officers I’ve ever met who didn’t strike me as economically pretty hardline and more inclined to regard both sides of politics are irredeemable spendthrifts and economic cretins. Moreover, it’s easy to be a critic of economic forecasts when no one has been getting it right for a year. But if we have somehow segued from recession to recovery without noticing it, we’ll be in a very peculiar position regarding our official forecasts.