Australia just posted an impossibly strong increase in jobs of 42,038 for May.
I say impossibly strong as a reflection of some comments I’ve received from old traders who have been in the market for more than 25 years since the release. The traders who I’ve spoken too are not the only ones: AMP Capital chief economist Shane Oliver tweeted his disbelief at the numbers also.
Given the recent flow of data in Australia and the NAB Business survey’s outlook for employment and consumers enduring concerns about job losses, reflected in the Westpac consumer sentiment index, it’s easy to see why traders and economists are doubtful the data.
Key here is that it is a “survey” and does have quite a large standard of error as a result.
But, in this data is the kernel of Australia’s economic transition.
Total employment in Australia just hit a new record of 11,759,600. But to put that in context total employment in Australia has continually printed new highs over the past 6 months. It’s climbing faster than trend at the moment. But if I extend that trend back to 1990 its right on the line.
So more Australians working means more Australians spending.
That for me is the key to the economic outlook in the second half of 2015 and into 2016, for consumption in the domestic economy. Sure, unemployment is still stubbornly high, even though it fell to 6% this month. For the moment unemployment hasn’t broken its uptrend, but it’s increasingly looking like the peak may be behind us.
Call me Pangloss but it seems to me that Australians finding jobs is the best way for the economy to buttress itself against the slower than expected uptick in business investment and the slower economic transition. Indeed more Australians in jobs could start the virtuous circle that helps drive business investment because more spending can improve conditions and confidence.
The Australian economy is far from out of the woods. But employment is a sure sign that neither is the economy crashing.