Dec 6, 2012

Jobs data: pollies get one over the economists

November jobs data suggests things aren't as gloomy as many claim, suggesting fiscal policy isn't the problem currently. Bernard Keane and Glenn Dyer report.

There's a growing gap between economists and politicians over the state of the economy. And today's jobs data appears to back the politicians, at least for the moment. The main bone of contention between the government and the opposition on economic policy is over the budget. Labor is engaged in a massive fiscal contraction that is sucking demand out of the economy at a time when the high dollar, softer (but still very high) commodity prices and turmoil in Europe and sluggish growth in America are undermining growth as well. But the opposition's view is that the government should cut spending even more rapidly. While there are a few reactionaries like David Murray who share the hairshirt thesis on fiscal policy, there aren't that many actual economists about at the moment who think our fiscal policy setting of aiming for surplus is correct. Today Warwick McKibbin, normally not a man found among advocates of pump-priming, came out to say the government should be borrowing more at current record-low bond rates and investing in infrastructure. The RBA's cut on Tuesday, and yesterday's national accounts data, seemed to suggest the economists might have a point, particularly given the apparently deeply wounded state of the housing industry. But not so with today's ABS jobs data. The sharp rise in the unemployment rate predicted by many doomsters didn't materialise: instead of the loss of 10,000 to 15,000 jobs as some forecasters had suggested would be reported, the number of new jobs rose and the unemployed rate fell to 5.2% on a seasonally adjusted basis. In trend terms, the rate was 5.3% in November, the fourth month that the rate has been at that level (the trend reading for October was cut to 5.3% from the first reported 5.4%, adding to the impression that the labour market is a little stronger than it seems). The participation rate fell 0.1% in seasonally-adjusted terms, but was steady in trend terms. The number of hours worked rose in the month, but the growth in employment came from part time work. That's normally is a sign that the labour market is soft, but this is the run up to Christmas, so it's more likely employers are adding staff for the Christmas sales rush, especially in some areas of retailing. Across the states, unemployment fell 0.1 points to 5.2%, off the back of a big fall in participation. Victoria increased 0.1 to 5.5%, off a smaller fall in participation; Queensland fell 0.1 to 6% but had a big jump in participation; South Australia had a big fall, 0.3 points to 5.6%, though participation fell there too. And WA reversed October's jump in unemployment to return to 4.1%, though again there was a fall in participation. Tasmania saw unemployment steady at 6.7%, though there was a fall of nearly 1 point in participation. So far this week we have had steady retail sales for October, seasonally adjusted (and a 0.2% rise in trend terms), economic growth slowing to 0.5% and an annual 3.1% from 0.6% and 3.7% in the September quarter and a 0.25% rate cut. Private credit growth in October was 0.1%, which is barely ticking over and private dwelling approvals fell after rising for several months. But November car sales data from the industry showed more than 98,000 units were sold through dealers, up 10.9% on a year ago and nearly 3% from October. In fact car sales had cracked the million vehicle mark for the first time ever by the end of November and are on track to reach an all time high of 1.1 million by the end of the year. For the moment, the politicians are defying the gloom and doom types successfully.

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5 thoughts on “Jobs data: pollies get one over the economists

  1. Daly

    Tony Abbott and Joe Hockey wrong AGAIN!

  2. Hugh (Charlie) McColl

    I reckon there’s enormous political capital stowed away in the proposed surplus. A demonstration of only slightly callous austerity by Labor will attract more votes than anything the Coalition can ever invent. The Libs are staking everything on Labor’s failing to deliver on the one financial/economic promise they have really made. So for both parties there’s an all-or-nothing seriousness about where this goes.
    With today’s unemployment and interest rate data, Labor is in a perfect position to tighten the belt a bit harder to show the world that we can practice what we preach. And have you noticed how Scott Morrison and the Coalition are on the verge of sharing the odium of the Nauru situation. I think Morrison was truly aghast at the crowded tent city and unable to think how it could be improved except to speed things up – which his government would have no idea about.

  3. Dogs breakfast

    Charlie is right again, the surplus issue is a political one, but the economists who argue that it is unimportant just have no understanding of how the world works, as well as being unable to forecast anything in their area of expertise.

    Of course it’s political, but to suggest that politics isn’t fundamentally tied to the economy, and vice versa, is to live in cloud cuckoo land.

    It is good policy to come as close to the surplus as they can, to reduce the demand, to allow more room for interest rates to go down, to enable people to pay off their mortgages faster (they aren’t spending their rate cuts, they are leaving payments as they are, overwhelmingly)

    Andy why is this good? Well, I don’t know about you, but I reckon that saving, or paying down your debts, after 20 odd years of spending every cent you could borrow is actually a wise move, a rational move, and puts us in a better position for the future.

    Personal debt is a huge weakness in the australian economy, and paying it down more quickly brings us closer to the moment that we can start to live a sustainable lifestyle rather than a profligate one.

    Now we just need the business sector to start paying down their debts. Oh, that’s right, did you know the great borrower in the Oz economy is actually business.

    McKibbin is right in one sense, it is a great time to borrow for infrastructure, but the problem is that you really should use that strategy when unemployment is rising, not when it is at 40 year lows and HOLDING STEADY FOR THE LAST 3 YEARS.

  4. floorer

    One of the great mysteries of the moment is the disconnect between the figures and reality. Not just mine either.

  5. AR

    wot Floorer opined – why is it that economists are even fed, or allowed to handle sharp implements like pens, when they are consistently, spectacularly & publicly WRONG,WRONG WRONG on every occasion, projection, prediction or phantasy?
    As for Her Maj’s Loyal Opposition, again why does anybody give them a moment’s attention, let alone airtime (and acres of print in Mudorc’s meeja) when the best it can come up with, courtesy of Sloppy Joe a couple of months ago “the figures are good but imagine what they’d be like if we were the government!” which was more of a threat than anything I could imagine – coz, like we KNOW what they’d do. For those with ther attention span of a gnat, look at Campy Newtman up north or Ballyhoo down Mexico way.
    Hands up those who want that nationally.

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