The jobs data is all sorts of confusing.
So for the past year or so we’ve all had our eyes glued to the economic scoreboard, and particularly to the unemployment rate data.
The unemployment rate had jumped to prominence because this was, supposedly, the trigger to end the easy money era that started with the Covid outbreak.
Phil Lowe wanted an unemployment rate comfortably below 5% before he would even think about raising interest rates. Josh Frydenburg said he’d wait until he got an unemployment rate in ‘the mid-fours’ before he would start to rein in government spending and begin a process of budget repair.
And then what did the scoreboard show last week?
An unemployment rate of 4.6%.
If that’s not a definition of ‘mid-four’ I don’t know what is.
So what does that mean. No more easy money for us?
Not so fast.
In many ways the unemployment rate this month is a bit misleading.
It did fall 0.3 percentage points – quite a substantial drop – to the lowest level since 2008. That’s impressive.
However this was on pretty much zero jobs growth. Full time jobs actually fell 4,200.
No, it was all driven by a fall in the participation rate – the number of people working or looking for work. People bailed on the jobs market in substantial numbers.
And it seems that it’s just hard to get out and look for jobs when your state is in lockdown. And that’s what we saw from the NSW data.
Employment was down a walloping 36,000, which is brutal. Total hours worked in NSW was down a huge 7%.
That’d be bad enough, but the number of unemployed was also down 27,000.
If those 27,000 people had found jobs, that’d be great. But they obviously didn’t because the jobs numbers are going backwards.
Rather, they just opted out of the jobs market, and stayed home (as there were instructed to do.)
The participation rate fell 0.21%.
So this is not a good news story.
That said, it’s not a disaster just yet.
While the participation rate fell, it remains around record highs, as all the people encouraged into the hot jobs market over the past year largely stay active.
And total employment has rebounded 8.4% from its May 2020 low and is now running 1.2% above its pre-COVID level:
So look, it does mark a turning point. I’d expect to get a pretty ugly number next month, and the unemployment rate to lurch back up above 5.
But we have had a very strong year, and that puts the Aussie labour market in a pretty good position to weather the storm ahead.
The other interesting thing to note was the release of the wages data last week.
That disappointed as well. The labour price index grew by only 0.44% in the June quarter, missing analyst’s expectations of 0.6% growth.
However, at an annual clip of 1.71%, wages growth is improving. Private sector wage in particular seem to be responding to the strong jobs market – they’re growing at 1.88% a year.
This is still lower than the CPI, so in real terms, wages are falling.
However, it is the strongest wages growth in a while, and does reflect the good work the labour market has done over the past year.
So look, the conditions that gave us easy money are still in effect. And with delta clouding the outlook, no one is going to be in any hurry to unwind anything anytime soon.
I wouldn’t even expect it in 2022 the way things are going.
Easy money is with us for a while yet.