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.