Thursday, 12 June 2008

Aussie Jobs Shrink for First Time in 18 months

Australian employment fell for the first time in 18 months according to the abs today. Employment fell by 19,700 of which just over half were full-time.

Before getting too excited over these numbers we would do well to remember that employment is a lagging indicator and that one month does not make a trend. There is no doubt that a slowdown in economic activity is underway in Australia, however it typically takes a while to see weakness show up in the labour market.

We would want to see the unemployment rate tick up toward 5.0% to signal a significant pullback in hiring by businesses.

Expect the labour market to remain reasonably tight for a few months yet. That said, the RBA may feel less pressure to raise rates anytime soon. The July futures contract now showing only a 2% chance of a rate hike in July.