Jobs Strength Becoming a Catch-22 for the RBA
PUBLISHED
2023-03-15
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Jobs growth looked solid in the early weeks of February, according to the latest payroll data from the Australian Bureau of Statistics, suggesting that today’s labour force data for the same month could also meet bullish expectations.
Most forecasts suggest that between 40,000 and 70,000 new jobs could be reported by the ABS today for last month, with the jobless rate edging dipping to 3.6% from 3.7% in January.
That seems an unusually high figure but economists suggest there will be some give back because of the weak January figures and the loss of jobs while tens of thousands of people had jobs but were waiting to start them.
The ABS payroll data suggests that there were more people in education and construction returning from summer breaks to take up new jobs in the month-long period which suggests some support for the idea of a pool of people in January with employment deals but who had not started actual employment.
AMP chief economist Shane Oliver wrote at weekend, "We expect employment to rebound by 70,000 following the impact of seasonal distortions in December and January that saw more people than normal indicating that they had a job to go to but were not in employment or looking for work.
"This is likely to also result in a rebound in participation such that while the unemployment is likely to edge back to 3.6% but still be up from its November low of 3.4%.”
The ABS payroll data for the late January and first part of February supports that idea.
The ABS said in the month to February 11, payroll jobs rose 2.6% to be 3.1% higher than the same period in 2022.
ABS head of labour statistics Bjorn Jarvis said, “The rise in payroll jobs to mid-February 2023 is a seasonal pattern seen before, as summer school holidays end and businesses return from their year-end holidays through January.
“This growth in payroll jobs in 2023 was also broadly consistent with the same period in 2020, before the start of the pandemic. It was below what we saw in early 2021 and 2022, but at that point payroll jobs were still recovering from impacts from the first and second years of the pandemic.”
Mr Jarvis said that, now the ABS has four years of Single Touch Payroll data, it is interesting to note the relatively consistent growth seen.
“Although each year has brought different experiences and impacts from the pandemic, the year-on-year growth in payroll jobs has generally been similar, at slightly above 3 per cent each year.”
Payroll jobs rose in all states and territories in the month to mid-February 2023, with the largest increases in the Northern Territory (3.9 per cent) and Victoria (2.8 per cent).
“Increases in payroll jobs in New South Wales and Victoria accounted for 59.3 per cent of the national increase in this period. This was slightly more than their share of total payroll jobs, which is usually around 57.1 per cent,” Mr Jarvis said.
The ABS data showed the jobs growth was across the economy with payroll jobs rising in 17 out of 19 industries in the month to mid-February 2023.
Education and training accounted for almost a third (30.9%) of the total rise in payroll jobs in this period (up 10.3%) as students returned to studies across the country. Their share of payroll job rises at this time of year was more than three times greater than their usual share of payroll jobs (8.6%).
As in previous years, there was a strong seasonal fall in payroll jobs in the Construction industry at the end of 2022 which was followed by a strong rise (6.0%) in the month to mid-February. This accounted for 14.8% of the total rise in payroll jobs and was more than double their usual share of total payroll jobs (6.7%).
If this is the actual situation in today’s jobs report, it will not be a welcome development for the Reserve Bank and its efforts to control inflation - it is still looking for the labour market to crack decisively.
Another report - from the National Australia Bank this time, does suggest that consumer spending has slowed noticeably in the past month or so.
The NAB said its latest data analysis showed consumer spending flattened out after rising in January, retailing was flat (as a few retailers have already noted, but not the likes of Myer though) and spending on essential services, vehicles and fuel fell.
The NAB said good and services spending “continued to rebalance, with a small decline in goods offset by a small increase in services spending. Similarly, there was a small decline in discretionary spending and small rise in non-discretionary.
“Business credits were also broadly flat up just 0.1% in February (or 0.6% excluding mining and agriculture). Credits are up 7.6% from a year ago but have been broadly steady over recent months.
According to NAB Chief Economist Alan Oster, “While we expect inflation likely peaked in Q4, price rises are likely still contributing to nominal spending growth and, as such, the flat outcome for February implies a soft outcome for real consumption. However, these data remain subject to significant seasonal effects so it will take time to get a clear read of consumption trends.”