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Jobs data brings good news for Tim Gurner (and the RBA)
Cartoon villain Tim Gurner is a long way from getting the jobs ‘pain’ he wants. But he can take solace that signs of labour market slackness should keep the RBA on the sidelines.
We’re a long way from the 50 per cent rise in unemployment that property developer (and new cartoon villain) Tim Gurner would like to see, but Thursday’s jobs data suggests there are some signs of emerging slack in Australia’s hot labour market.
And that may be enough for the Reserve Bank to avoid a late-year rate rise.
Rich Lister property developer Tim Gurner has caused a global stir with his call for economic pain. Michael Quelch
While jobs growth of 64,900 was well above consensus forecast for 25,000, the Australian Bureau of Statistics reckons it’s worth zooming out to consider the past two months, given we saw a drop in jobs growth in July, probably because of school holidays.
Across July and August, average employment growth was around 32,000 people per month, similar to the average growth over the past year.
Capital Economics’ Abhijit Surya suggests it’s worth looking beyond the headline unemployment rate, which remained steady at 3.7 per cent, for an idea of what’s really happening in the labour market.
He says four data points – the increase in the participation rate from 66.9 per cent in July to 67 per cent; the rise in the underemployment rate from 6.4 per cent to 6.6 per cent; the rise in the under-utilisation rate from 10.1 per cent to 10.2 per cent; and an 0.5 per cent fall in hours worked in the month – all suggest wages growth has probably peaked.
The labour market remains very strong, particularly in the context of the 4 percentage points of rate rises the RBA has delivered since May 2002.
But most economists think there are enough signs of slack to keep the central bank on the sidelines for the next few months – and perhaps until it decides cuts are required.
Is Gurner going to get the “pain” he believes is necessary to reset the attitudes of his workers? Not any time soon.
But these early signs that the labour market is cooling could help him and the rest of the property sector avoid the hit to buyer confidence and housing affordability that another rate rise would bring.
Incoming RBA governor Michele Bullock still has plenty to worry about, including rising oil prices and sticky services inflation. But the job market is staying in Goldilocks territory for now.
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