Today’s employment report is more important than usual after the shock bounce in the unemployment rate to 6.4% last month.
The market is look for a rise of 15,000 and a dip in the unemployment rate to 6.3%.
But David Flanagan, Director Interest Rate Markets at Curve Securities in Sydney, thinks the market might be disappointed.
Flanagan, whose economic analysis I have used extensively over many years, has been plagued by a burning question about the Australian employment market: “Why are job ads so strong but NAB (Business Survey) employment intentions and jobs growth so subdued?”
He’s been thinking about it a lot and has formed the following view:
There is a structural change occurring in the employment market that has been under way for some time and has been most evidently seen in the participation rate. What seems to be occurring is that the boomer generation is retiring, with many staying on a little longer than planned after their super took a hit during the GFC. In simple terms the data suggests that companies are looking to replace these boomers, who are generally in higher level positions but not actually replacing the headcount by hiring a junior at the other end of the line as everyone shuffles up one spot and instead using productivity gains to fill the head count void.
This would go some way to explaining why we have seen a large divergence between the ANZ job ads series, and the NAB series, which looks at new hiring intention. It is also consistent with lacklustre jobs growth and falling participation.
Ultimately we are likely to see some growth in employment over the months ahead; however, the relationship between job ads and overall employment might not be a strong as it has been previously.
Flanagan told Business Insider that it means that the unemployment rate might prove stickier above 6% and employments gains weaker than the market expect in the coming months.
We’ll have full coverage on Australia’s employment data here at Business Insider from 11.30am AEST this morning.