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Economy

Feb 16, 2012

Ignore the anecdotes -- jobs growth is returning

The latest jobs figures confirm that th economy is off to a much stronger start in 2012 than last year.

Once again the doom and gloomsters and the Hanrahans will have to eat their jobs statistics and reflect on their beliefs about the Australian economy. Strong jobs data from the Australian Bureau of Statistics backs the Reserve Bank’s decision last week not to cut its cash rate. Unless there’s a significant worsening in Europe or the local jobs market in the next few months, you can just about rule out any more rate cuts. In fact, a rate rise might be in the offing later in the year if we get more months like January for jobs

The figures out this morning show that a total of 46,300 full and part-time jobs were added last month, more than offsetting the loss of 29,000 in December that brought forth a wave of handwringing and grim predictions. That was the largest number of jobs for over a year.

The employment data adds to the growing impression that the Australian economy is gathering pace after being whacked last year by the floods and cyclone Yasi in January, the uncertainty from Europe and a slide in business and consumer confidence.

There were strong performance right across the country. A big fall in the unemployment rate in NSW — down from 5.6% to 5.2% — is great news from the country’s biggest state that for so long has underperformed courtesy of a disastrous Labor government. Victoria was steady at 5.1%. Queensland was also steady at 5.4% but there was a big rise in participation, nearly half a percentage point, led by a surge in female participation. WA was also steady — and still the best in the country — at 4.1% but that also saw a big rise in participation, 0.7%.

The unemployment rate, seasonally adjusted, dipped to 5.1% (5.2% on the smoothing trend basis).

There’s been incessant publicity about job losses lately — the 500 jobs lost Qantas today and the 1000 at the ANZ earlier in the week are the latest examples. AAP even produced a table of recent job losses this morning showing roughly 6000 jobs lost or could be lost. Every one of those losses have generated headlines, grim productions, moans and groans from unions, employers and those involved. And everyone represents a real person facing dislocation.

But as Ross Gittins pointed out in an excellent piece yesterday, anecdotes don’t tell anything like the full story. Compare those 6000 to the 12,300 full-time jobs created in January and the more than 46,000 new jobs for the month. There are no anecdotes floating around about those.

The jobs market is weak in sectors like finance, retailing and some areas of manufacturing. But it is strong in others (and sometimes it’s strong in some sub-sectors of retailing and manufacturing, too). That is constantly overlooked by the jobs alarmists who overcook the numbers or the trends in the economy.

The January numbers also reversed the trend in December, when it was the absence (or, rather, non-seasonal appearance) of part-time jobs for females in the group 15 to 24 that helped produced the sharp drop in that month. “The increase in seasonally adjusted part-time was driven by an increase in female part-time employment whereas the increase full time employment was driven by an increase in male full-time employment,” the ABS said.

The ABS reported an increase in the labour force participation rate, which has been trending lower since the end of 2010: 0.1 percentage points in January to 65.3%. In fact, the economy generally has started 2012 much stronger than a year ago when it was flattened by the supply shock and boost to inflation delivered by the floods and cyclone.

While Europe is still a big concern (and why the market tanked this morning), the economy is solid, as new RBA Deputy Governor Phil Lowe said in his first speech for 2012 in Sydney:

“… the Australian economy started 2012 in relatively good shape. Growth has been around trend and inflation is consistent with the target, and there are reasonable prospects for this to continue. We also have much more flexibility to deal with unfolding events than almost any other developed economy.”

There’s a slew of data to back this up. There was a noticeable pick-up in housing finance in December, after the two rate cuts, but it’s still at multi-decade year lows according to some measures. While retailing is sluggish, it is not a disaster area that many media writers and industry players would have us believe. Women’s fashionwear retailer Noni B lifted profit by a bit more than it expected in the six months to December; The Reject Shop (which was nearly knocked out by the impact of the floods a year ago, closing a just-opened distribution centre in Brisbane) lifted profits in the tough December half-year and expects to lift them again this half and open seven new outlets.; consumer electronics retailer JB Hi Fi wasn’t consumed by the slide in TV prices, the rise of the dollar or weak demand: it survived and reported results slightly better than expected for the December half-year.

Car sales rose in January, which had the best start to a year for five years (since 2007). Online group Carsales.com.au lifted profit 20%.

And Westfield Retail Trust, which owns 50% of the Westfield malls in Australia, along with parent Westfield Group, reported solid profits and a perk-up in sales in December throughout its 55 malls across Australia and NZ. Some sectors were weak, particularly in Sydney, but the group expects sales growth to continue this year.

None of this is evidence of the sort of gloom that appears to grip so many commentators for whom the simple economic narrative is that the mining sector is doing fine by the high dollar and higher bank funding costs are wrecking the rest of the economy. The data simply doesn’t show that, regardless of however many anecdotes emerge about job losses.

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61 comments

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61 thoughts on “Ignore the anecdotes — jobs growth is returning

  1. Bob Robson

    Good work. Thanks B, G.

  2. David Hand

    The great challenge of this area of economic management is that it is better for everyone if resources can move to to where the need is but the people whose role is redundant bear all the pain. And they’re the ones covered forensically on the evening news. The pain suffered by redundant workers is what gives economic rationalists a bad name. The economic benefit whish is greater than the loss but spread across many people is not so apparent.

    It is the government’s role to manage the transition as it affects communities. As industries have their heyday and then decline we should not resist the change but manage it.

  3. Damien

    I agree with Gittins and yourselves that sensational staffing cut stories don’t indicate much of anything. But neither, I submit does ABS unemployment figures. These have been comprehensively rorted over the years to under report the issue. For example, if ABS survey respondents have been employed in a paid or unpaid capacity for as little as one hour in the previous fortnight, they’re counted as “employed”.

    Also, people who may have been retrenched or have otherwise lost their job who have a working spouse on average wages and, perhaps, a few thousand in assets and savings probably won’t (or can’t) register as unemployed because they’re not entitled to any income support or employment service support. The same applies for recent school leavers and young people up to the age of 25 who reside with working parents. Substantial numbers of people in those situations won’t be registered as unemployed so they won’t influence the participation rate making the unemployment rate will look artificially small.

    It’s one thing to ask people not to draw conclusions from sensational headlines, but let’s not swallow the little ABS employment statistics tell us uncritically and ask us to believe we’ve never had it so good.

  4. David Allen

    Perhaps the coalition have forgotten that Ansett Airways completely closed down during their watch? Now how many jobs did that cost?

    “… It is found that due to sectoral multiplier and flow-on effects each job lost in such an important sector leads to a loss of approximately 3 extra jobs in the economy as a whole. The empirical results are broadly consistent with previous studies. Overall, the Ansett collapse brought about an indirect loss of 54880 jobs in 105 sectors of the Australian economy”

    See – Ansett? Discussion Paper No. 137
    By Valadkhani, Abbas
    Google it!

  5. SBH

    small thing – ’employment data adds’ should be ’employment data add’. You say anachronistic pedant I say Orwell.

  6. Modus Ponens

    Senior Treasury officials in estimates just said a similar thing today in response to Greens Senator Larissa Waters questioning of mining industry claims of them having a ‘jobs multiplier effect’.

    Dr David Gruen, Executive Director of the Macro Economic Group, stated;

    “In a well-functioning economy like ours, with unemployment close to its lowest sustainable rate, it is not the case that individual industries are creating jobs, they are simply re-distributing them… there really isn’t a multiplier.”

  7. GocomSys

    Who are the circulator’s of negative anecdotes prey tell? The usual culprits? I am surprised that this story at least attempts to set the record straight despite the expected standard facetious barbs. No good news story without a few put-downs.

  8. Dogs breakfast

    What my be lost on some is that the Oz economy is undergoing a transformation that may end up making Keating’s re-modelling look pedestrian in hindsight.

    There are three significant factor, viz; the economic mess of most of the developed nations, the resources boom and its effects on our dollar and consequently every exposed industry, and fundamental change brought about by technology, largely the internet.

    The days of relying on housing and retail are long gone, and should not be missed. Relying on housing is unsustainable, relying on retail to supply largely unskilled labour is not going to see us enriched as a nation. I won’t be lamenting their reduced impact on the economy.

    Manufacturing is a different proposition. While not subscribing to the idea that we must have a car industry, just because, it seems reasonable to think that a country that can’t manufacture anything is going to find itself in trouble one day, when the mines run out and the farms are barren.

    As others have said, we shouldn’t be stopping it, but we should be supporting those who are suffering in the transition. Most of us will be there one day.

    And in all of this, the most politically inept government for many a day just continues to produce the best policy and reform outcomes that we have seen since Keating, and comparable to no other govt since the war.

    Again, we are the lucky country, muddling through in spite of ourselves, in spite of a hung parliament, a bereft Labor party and a clueless opposition.

    How? I don’t have a clue.

  9. Bobalot

    But…but…but…

    Tony Abbott, the Liberals and many political correspondents told me the ECONOMY WAS ROONED!

  10. Dogs breakfast

    But don’t let our good fortune stop the whinging and the whining, or blowing up when we have to pay for our own health insurance because we earn a quarter of a million dollars per annum.

    Keeping a head held high and being thankful for what we have, well that would be positively unaustralian.

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