After the flow of data for June and a couple of early reports on July, the Australian economy remains mired in a very slow lane, except for the resources sector.
While that’s no dramatic change, it’s also clear that compared to the US, much of Europe, the UK and some other economies, Australia remains in very a healthy position as global markets surge and fall and worries about the eurozone damage confidence.
China’s all important economy is still doing well, despite continuing signs of a slowdown, and Japan, South Korea and Taiwan are still solid.
The region will grow at nearly 8% this year and next, according to forecasts from the Asian Development Bank.
Australian domestic demand though continues to be soft and unemployment in July rose to 5.1%, for another weak monthly report which confirmed that the strong growth of last year has faded from the jobs market.
Consumer and business confidence remains weak and business conditions have sagged, housing is very subdued and demand for finance remains sluggish.
Australian retailing is flagging, except in food, as we saw with reports this week from Harvey Norman and JB Hi-Fi, the country’s two leading consumer products retailers.
Both have been forced to restructure underperforming parts of their businesses by the weak consumer demand and high Australian dollar.
And yesterday, David Jones revealed a 10% fall in fourth-quarter like-for-like sales and said the first quarter of the new financial year had shown no improvement, putting the 2012 earnings guidance in severe doubt.
David Jones said its earlier earnings guidance for a decline of 15% to 20% in first-half 2012 net profit was based on an improvement on fourth quarter sales that had not appeared, thanks to the turmoil in the markets and weak consumer confidence.
Sales for the 13-week period fell to $462.1 million from $549.6 million and in turn full-year sales dropped 4.7% to $1.958 billion.
Sales in the second half were down 9.6%.
David Jones reiterated that profit after tax for fiscal 2011 would fall by up to 2%.
David Jones shares again fell, down 6.4% to $2.62, Harvey Norman shares ended unchanged on $1.96 after a fall to $1.935, but JB Hi Fi shares were in demand, up 1.5% or 23c at $15.62.
That has pushed JB shares up around $2, or 14% from the lows of Monday after it revealed its 2010-11 earnings and the cuts to its Clive Anthonys chain.
Despite the headlines yesterday to the contrary, the rise in the unemployment rate and fall in full time jobs wasn’t unexpected.
Despite market forecasts being for 10,000 new jobs and a steady jobless rate of 4.9%, these same forecasters have been wrong several times this year already in missing weak employment data.
This time around the rise in unemployment was due to more people looking for work, not a rise in unemployment, while there was a rise in the number of hours worked last month, another sign of a solid jobs market.
In July, the economy lost a net 100 jobs, hardly a catastrophe as 22,200 full-time jobs were lost and 22,100 part-time positions created.
The unemployment rate has been hovering around 5% since December.
The jobless rate peaked at 5.8% in mid-2009 despite fears at the time that it would rise to 8%.
The weakening trend was emphasised by revisions for June labour figures.
The ABS said a net 18,200 jobs were created in June, not the 23,400 reported.
In June, a revised 51,100 full-time jobs were created, down from the earlier report of 59,000 such positions.
Part-time jobs fell 32,900 in June, a slightly smaller drop than the 35,600 loss first reported by the ABS.
The ABS said the number of people unemployed increased by 18,000 to 611,600 in July, which is usually a bullish sign in that it means people are more confident about finding work.
The ABS monthly aggregate hours worked series showed an increase in July, up 3.6 million hours to 1,621.4 million hours.
That again is an interesting sign: it can be seen as bullish, but with the loss of full-time positions and increase in part-time work, it can also mean people are working more overtime and longer unpaid hours because employers have become reluctant to add more staff.
The ABS reported a labour force participation rate in July of 65.6%. That’s unchanged.
Looking at the states, the unemployment rate jumped in Victoria to 5.1%, from 4.6% in June, while in NSW it was flat at 5.2%.
Flood-affected Queensland saw a rise to 5.6% from 5.2% in June, and South Australia, saw the jobless rate rise to 5.3% from 5.1%.
WA saw a fall to 4% from 4.2% and in Tasmania it fell to 5.2% from 5.5%.
Earlier the federal government’s leading employment index again pointed to a weakening labour market with a fourth monthly fall in a row.
The Department of Education, Employment and Workplace Relations says its monthly leading indicator of employment fell 0.063 points to 0.322 in August.
The department said all four components of the indicator subtracted from its growth rate in August.
"However, it is still too early to confirm a prospective slowing in employment growth, to a rate below its revised long-term trend of 2.0 per cent per annum, because the indicator has fallen for fewer than six consecutive months,’’ the department said.
The leading jobs
