The Australian economy is doing well at the moment.
Retail sales are growing at their best rate in 4 years.
Building approvals are running at a 20% year-on-year rate.
106,000 jobs have been created in the past 6 months.
But consumer sentiment is back below the 100 line (signalling pessimism).
Clearly this disconnect between the improving economic reality and consumer sentiment is a conundrum that the RBA has noticed. And one it believes is partly caused by the coverage of high-profile job losses, which it indicated in today’s statement on monetary policy.
Labour force data are often reported in terms of the net change in employment. However, on average, around 400 000 people have exited employment each month over the past few years (Graph 3.20). A similar, or slightly larger, number of people enter employment each month, with the sum of these two gross flows typically resulting in a net increase in employment over time. These large gross flows into and out of employment each month are mostly accounted for by small changes in employment at many firms and so garner little public attention. In contrast, the recent high-profile announcements of job losses at some larger firms that are planned to be spread over coming quarters and years are small relative to the gross flows typically seen each month.
So to paraphrase: stop worrying about the high profile job losses, they just don’t matter.
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