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Noticias de trading
17 Apr 2015
Why the Australian labour market is picking up? - Deutsche Bank
FXStreet (Bali) - Adam Boyton, Chief Economist Australia at Deutsche Bank, takes a look as to why the Australian labour market appears to be picking up now, concluding that there is a risk that the RBA February rate cut could end up being ‘one and done’.
Key Quotes
"As for why the labour market appears to be picking up now, we think there are two points worth noting. First, while there is intense focus on activity in the mining sector, this is largely a capital and not labour intensive sector. Attracting less attention is the robust jobs growth that has occurred over the past year in sectors like accommodation, cafes & restaurants and also professional services – two labour intensive sectors likely to be benefiting to varying degrees from the pronounced weakness in the AUD over the past year."
"Second, in our view many observers of the economy miss the key link between commodity prices and employment. While we have long argued that the terms of trade (aka commodity prices) has a significant impact on the Australian labour market, it is important to understand how. While many focus on the direct link between lower commodity prices and the mining sector, in our view the indirect linkage between lower commodity prices, government revenues and then public sector spending and employment are likely to be at least as significant. With changes of government across some of the larger states recently, and the Federal Government unlikely in our view to attempt to offset the impact of lower commodity prices on their budget bottom line, that nexus between commodity prices and public sector employment is likely to be weaker over the coming year than it has been in the past."
"Finally, we note that there is currently no clear trend higher in the unemployment rate. That suggests that a rate cut in May might in fact be a very close decision. Indeed, we noted on the release of last month’s labour force data that at the moment the risks around that point forecast of 2.0% [for the cash rate] would appear – in our view – to favour the cash rate staying at 2.25% rather than getting to 1.75%. In the wake of the Aus jobs data that certainly remains the case. Indeed, there is a risk that the February rate cut could end up being ‘one and done’."
Key Quotes
"As for why the labour market appears to be picking up now, we think there are two points worth noting. First, while there is intense focus on activity in the mining sector, this is largely a capital and not labour intensive sector. Attracting less attention is the robust jobs growth that has occurred over the past year in sectors like accommodation, cafes & restaurants and also professional services – two labour intensive sectors likely to be benefiting to varying degrees from the pronounced weakness in the AUD over the past year."
"Second, in our view many observers of the economy miss the key link between commodity prices and employment. While we have long argued that the terms of trade (aka commodity prices) has a significant impact on the Australian labour market, it is important to understand how. While many focus on the direct link between lower commodity prices and the mining sector, in our view the indirect linkage between lower commodity prices, government revenues and then public sector spending and employment are likely to be at least as significant. With changes of government across some of the larger states recently, and the Federal Government unlikely in our view to attempt to offset the impact of lower commodity prices on their budget bottom line, that nexus between commodity prices and public sector employment is likely to be weaker over the coming year than it has been in the past."
"Finally, we note that there is currently no clear trend higher in the unemployment rate. That suggests that a rate cut in May might in fact be a very close decision. Indeed, we noted on the release of last month’s labour force data that at the moment the risks around that point forecast of 2.0% [for the cash rate] would appear – in our view – to favour the cash rate staying at 2.25% rather than getting to 1.75%. In the wake of the Aus jobs data that certainly remains the case. Indeed, there is a risk that the February rate cut could end up being ‘one and done’."