Markets in Australia were left a trifle confused by the combination of weak jobs data for July, and reasonable trade data from China for the same month.
Market forecasts had been for weak reports on both areas, so the dollar dropped sharply when the jobs data was issued at 11.30 am (it showed a worsening outlook for employment, despite the steady jobless rate at 5.7%).
But then the better than forecast trade data was issued in China, and up went the dollar, rising around half a cent to end around 90.70 USc in local trading – 2.5c above its most recent low of about 88.48c earlier this week.
The better news from China (for how long we don’t know) helped push the dollar higher in offshore trading – it bounced to a high of 91.35 overnight before closing around 91.15, up 1.6 US c on the day.
The Chinese trade data had a settling effect on most markets.
The local share market ended higher – it was lifted by the better than expected trade data in afternoon trading, but took its early strength from the Telstra profit report and hint that the already rich 28c a share could rise early next year.
Telstra shares rose 2% to $5.11, 5c under its most recent high of $5.16 and looking like it will reach and top that level in the next week. Shares in other high yield stocks also improved.
The Chinese trade data showed a 5.1% rise in exports and a 10.9% rise in imports to produce a $US17.8 billion trade surplus.
That was down from the $US27.8 billion surplus in June when exports disappointingly fell 3.1% and imports dipped 0.7%. Western analysts again question the accuracy of the data, but were left with no way of cross-checking it.
Late today we get more data from China, so another test from the market.
Figures for inflation, industrial production, retail sales and urban fixed asset investment will be issued. Banking lending figures are out next week. Car sales and electricity production and demand should also make their way out today or the weekend.
Seeing the two surveys of Chinese manufacturing activity last week showed a split — the government survey of big companies rose further into expansion mode, while the HSBC survey fell deeper into contraction (it covers small and medium companies), analysts say the data out today could end up negating yesterday’s upbeat tone.
In Australia, the July jobless report underlined the challenge ahead for whoever wins the September 7 election. It revealed more of the jobs crunch hinted at last week by the federal government, which forecast that unemployment would rise to 6.25% this financial year.
Unemployment rate holds steady in July
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The data shows the number of jobs fell by around 10,000, as market forecasts had suggested, but the unemployment rate remained steady at 5.7% because the participation rate eased back from the rise of the month before. That is, the jobless rate didn’t rise because people stopped looking for work.
The fall in employment was due to lower full-time employment, down 6,700 people to 8.134 million, and a drop in part-time employment, down 3,500 to 3.51 million. There was a fall in both full and part time employment amongst men and women, further hinting at the weakening tone to the jobs market.
We could be at a tipping point where the rise in the number of people losing their jobs finally overtakes the small growth in the labour market and starts push up unemployment towards 800,000 and well over 6%.
Confusingly, the number of hours worked rose by 7.9 million in July in seasonally adjusted terms and in trend terms to a record high. But while that’s normally encouraging, when you compare this to the loss of jobs across the board, it’s more a sign that employers are working staff harder rather than putting them off.
When the jobless numbers rise, the unemployment numbers rise and the hours worked fall, then that’s when we will know that the jobs crunch is starting to bite.
The ABS said what it calls the employment-to-population ratio (which "expresses the number of employed persons as a percentage of the civilian population aged 15 years and over) decreased to 61.4% (seasonally adjusted). The trend employment to population ratio decreased to 61.5%.
The decline has been going on since early 2012, slowly at first, but gathering pace in the last few months (on a seasonally adjusted basis), while the trend series shows a slight flattening out.
That’s what saved this jobs report from producing a worse headline for Prime Minister Kevin Rudd than it should have: the unemployment rate stayed at 5.7%, but the weakness in the jobs market is there for anyone who looks closely.
