RBA to sit. None of the dozen or more economists in a survey from AAP on Friday have foretold of a Reserve Bank interest rate change at tomorrow’s meeting, and only three reckon there will be another rate cut in the future. The economy is bumbling along in low gear, despite the uncertainties offshore. In fact, if you looked at Friday’s retail sales figures for August, the most important news was that retail sales last month were up 4.3% from August 2014. That is well ahead the low rate of inflation (2.25% underlying), less than 1% headline. That’s down from the 4.7% rate a couple of months ago, but the same as in March.
In the US, by way of comparison, retail sales in August were 2.2% higher than a year earlier. The US economy is stronger than ours, with lower jobless rate, but real wage growth is weak there as it is here. The minutes of the August RBA board meeting showed an extensive discussion of the Chinese economy — economists say watch for any comments from the central banks on the slowing in activity offshore in the past month, especially in Asia, where our major export markets lie. Watch also for any sign of concern about the finances of emerging economies, such as Brazil, Turkey, Russia, China. Also watch for a mention of financial stability in Australia, especially with the fading housing boom. — Glenn Dyer
Distrusted Origin. If Origin Energy can’t convince big shareholders to swallow their share of the $2.5 billion capital raising ($1.4 billion), what hope does it have of getting retail shareholders to eat their share of the $2.5 billion raising (around $1.1 billion)? Big investors took up 92% of their entitlement, meaning 28 million entitlements were later sold by underwriter Macquarie to complete the big shareholder part of the issue. But ahead lies the retail raising, and Origin has a reputation for value destruction like that of Myer — and retail investors rejected its fundraising last month. So Macquarie will have to find a home for hundreds of millions of dollars of Origin shares amongst the very groups — institutional shareholders — who didn’t want 100% of their share of the raising.
Meanwhile, spare a thought for poor, hard up Woodside. Those folk at Oil Search continue to reject Woodside’s $11.6 billion paper issue and demand more money. Now Woodside is on a “charm” offensive, telling anyone who will listen (among the business media) that it can’t pay any more for Oil Search. Woodside CEO Peter Coleman says a higher offer price would hurt his own shareholders (and Coleman’s job?). Well, there’s an easy solution — drop the bid and walk away. It’s your decision. Why destroy value? — Glenn Dyer
US jobs reality #1. Friday night’s US jobs report for September confirmed the continuing strength of the US economy, even if the number of jobs created last month fell to a lower than expected 142,000 and the number of jobs created in July and August fell by a revised 49,000. But the report also confirmed the reality of the jobs market, and a reason why the Fed remains worried. It’s not the continuing weak pay growth — running at around 2.2%, where it has been for the past couple of months — nor was it the jobless rate, estimated at around 5.1%. No, it was the very weak labour force participation rate, which hit a reading of 62.5% in September (Australia’s is 65.0% at the moment, and edging higher).
The US rate was the lowest since October 1977, when Jimmy Carter was US president. That tells us the reality for the US workforce is grim — not too many people are that confident about looking for and finding work and remaining employed. While the decline can be partly laid at the feet of baby boomers returning from the work force, the participating rate in the prime jobs age group — 25 to 34, has fallen to 80.6% in September from 84% at the start of 2008. Job vacancies are at an all-time high, people receiving unemployment benefits at multi-decade lows, the economy is supposed to be stronger than at any time since the recession, and yet millennials are not joining the work force and finding work. So how are they paying for their smartphones and expensive data plans? — Glenn Dyer
US jobs reality #2. Perhaps these younger people have better awareness of the new reality of the US labour market — of the rising tide of job losses among US companies. Jobs come and go everyday in a modern labour force as companies change, expand, contract, die are born. But quietly, the pace of sackings has accelerated. According to US outplacement firm Challenger, Gray & Christmas, American companies have cut more than 493,000 jobs so far in 2015 — a 36% increase from the same period last year and 2% more than the total number of layoffs announced in 2014. The question is whether this remains a minor trend along side continuing jobs creation, or whether it slowly cripples the wider labour market. Markets reckon the weak US jobs growth last month postpones a Fed rate rise until 2016. If the pace of job cuts continues, it will become a negative for the Fed to fret about. — Glenn Dyer
Iron ore exports keep truckin’. Iron ore prices fell 5.2% over the weekend to trade around US$53.14 a tonne. The fall came despite continuing strong exports from the world’s biggest export port of Port Hedland. In fact data from the Pilbara Ports Authority shows ore exports reached an all-time high last month, just topping the record set in August. Exports totalled 39.4 million tonnes in September, up from 39.2 million tonnes in August, and well ahead of the 36.3 million tonnes in August, 2014. Shipments to China were little changed at 33.8 million tonnes, slightly under the record 33.9 million tonnes in August. — Glenn Dyer