Normally jobs data as strong as we got yesterday for February would be enough to send the Reserve Bank looking for the half a per cent lever for its cash rate – but these are anything but normal times.
The strong jobs report wasn’t such as surprise – the Australian Bureau of Statistics (ABS) suggested the January Labour Force report was stronger than it seemed on paper – quite a few economists and commentators failed to see that and preferred to see significance in the rise in the jobless rate to 3.7% from 3.5% in December.
The ABS said there were a lot of people employed in January but who had not started jobs and were waiting to do so which suggested the loss of 15,000 jobs wasn’t as it seemed.
Then on Wednesday the ABS reported that the monthly payrolls data to February 11 confirmed that large numbers of people – mainly in education and construction, took up their jobs when the summer holiday breaks ended.
Thursday the February labour force figures confirmed that, with seasonally-adjusted unemployment dipping back to 3.5% in February from 3.7% in January.
The ABS also said that nearly 65,000 new jobs were created in February (so a net 50,000 over the two months, which is solid growth by any measure). As well, the number of unemployed fell 17,000 people and hours worked jumped, and the underemployment rate fell to 5.8% (which is where the jobless rate was two years ago!).
“The February increase in employment follows consecutive falls in December and January. In January, this reflected a larger than usual number of people waiting to start a new job, the majority of whom returned to or commenced their jobs in February, ABA head of labour statistics, Bjorn Jarvis said on Thursday.
“This was particularly evident in the South-East of Australia, with larger than seasonal numbers of people entering into employment across New South Wales, Victoria and the ACT.”
With the higher than usual number of people transitioning into employment in February, the number of people indicating they were waiting to start a new job returned closer to normal levels.
In line with the increase in employment, the employment to population ratio increased 0.2 percentage points to 64.3 per cent in February, back to the level in December 2022.
The participation rate rose 0.1 percentage point to 66.6 per cent in February, also back to the level in December 2022.
Seasonally adjusted monthly hours worked increased by 3.9 per cent in February 2023
“Following the 2.1 per cent fall in January, when more Australians than usual took annual leave, the hours worked in February bounced back strongly to a level similar to late 2022, and were 5.1 per cent higher than February 2022.
“In February, there were also no major disruptions that affected peoples’ ability to work their normal hours, such as the widespread sickness or natural disasters that we have seen over recent years,” Mr Jarvis said.
But there is one extra factor that the RBA will have to consider at its early April meeting – the interest rate decisions from the European Central Bank (due Thursday night) and the US Federal Reserve, due March 22.
The ECB has the tough decision – what does it do to rates with the $US60 billion plus rescue of the weakened Credit Suisse, one of the globally systemically vital banks, now underway?
Coming straight after the collapse of the Silicon Valley Bank, Signature Bank and before them, Silvergate Bank – do the world’s two most important central banks continue to worry about inflation and boost interest rates, even by 0.25% instead of half a per cent, or do they do nothing and wait.
Doing nothing conveys further risk, as it suggests the central banks think the markets and sentiment are too fragile to handle a rate rise. That’s a view the RBA will have to consider at its April meeting.
If the ECB lifted rates on Thursday and nothing dramatic happened in the markets and leads to a rate rise from the Fed, then the RBA will probably be tempted to lift rates, but probably do nothing as it seemed to be intending before the bank crisis erupted last week.
Recent developments in New Zealand (see separate story) should be a strong warning to the RBA about the fallibility of central banks.
