Jobs dominate the local thinking in financial markets this week with the May Labour Force report to be released by the Australian Bureau of Statistics on Thursday and expected to show more new jobs were created last month.
The labour market is now the most important indicator so far as the Reserve Bank is concerned and it is being closely watched to see if there are any signs of a slowdown in the strongest run of job creation in the country’s history – more than three years and over 400,000.
April saw the pace of new job creation rise to an annual rate of 2.5% (above the long term average of 2% and well above the 1.7% growth expected in the labour force this year). That 2.5 rate was the strongest since August last year and the annual number of new jobs returned to well above 300,000.
Economists do not much change to that – the AMP’s Chief Economist, Dr Shane Oliver sees 20,000 new jobs having been created last month and the seasonally adjusted jobless rate falling from 5.2% in April to 5.1% in May.
The short term boost from temporary jobs to handle the May 18 election will be a one-off boost employment, according to economists.
But after the shock slide in new jobs in may in the US, some economists wonder when there will be a similar surprise in Australia. Just 75,000 new jobs were reported last month and a fruther 75,000 were carved off figures for March and April. The market forecast was 185,000.
Economists now see the figures as the start of monthly reports that will end up seeing a fall in the monthly total.
The US economy has created an average of 151,000 new jobs in the past three months, down from as high as 238,000 at the start of the year and confirmation that the labour market is a lagging indicator for central banks and governments – both downturns and bounce backs.
That’s because employers put on more workers while sales are starting to slow in the hope that the slowdown is temporary and then they cut jobs if it continues and deepens. At the other end of the process, employers are slow to add workers (preferring at first to add part timers first) as they wonder if the emerging upturn can be sustained.
Economists will now be looking for similar signs in the Australian monthly data – and the other key indicator – job vacancies. The May quarter figures are out next month along the June quarter inflation figures.
Tomorrow sees the widely watched May business confidence and conditions report from the National Australia Bank and Wednesday sees the consumer confidence report for May as well.
In the US inflation data (on Wednesday) is expected to show core CPI inflation steady around 2.1% year on year and retail sales (on Friday) growth of around 0.6% month on month, although that could surprise on the downside.
Industrial production (out on Friday as well) is forecast to rise.
In the UK, the twists and turns continue in the Brexit debacle with attention now switching to the vote by Conservative party parliamentarians on a new leader.
The latest data for UK inflation and GDP will also be released.
Chinese data for May started on Monday and will help shed light on how the economy is holding up as the trade war returned.
Exports and imports data Monday was out yesterday and inflation data later today (Tuesday) will show a rise because of rising pork prices linked to the swine flu epidemic that is still sweeping through Chinese pork farms.
Friday is expected to see subdued growth in industrial production and investment, but a rebound in retail sales growth and continuing strength in credit growth. Watch also for figures on car sales.
Today also sees the final estimate of Japanese first quarter GDP.