Thursday, September 22, 2011

Rising unemployment? I Don't believe it - RBA deputy

Perhaps he shouldn't

Reserve Bank deputy governor Ric Battellino has an answer to those who say they are concerned by rising unemployment: He doesn’t believe it.

Australia’s unemployment rate has climbed from 5 to 5.3 per cent since the start of the year. The Bureau of Statistics says the number of unemployed has climbed 31,000.

But the deputy governor says “other aspects of labour market numbers that have a stronger feel”. Addressing a Euromoney magazine conference in New York (the same magazine that made Wayne Swan Finance Minister of the year) Mr Battellino said the employment survey also showed solid growth in the total numbers of hours worked.

Suspiciously the recent rise in unemployment had been “most pronounced in the resource-rich states”, suggesting growing unemployment was not widespread and is not the result of a two-speed economy.

And independent evidence didn’t tally with the Bureau’s figures. As Battellino told the NewYorkers, “the number of people on unemployment benefits does not
point to any rise in unemployment”.

He’s right. Since the start of this year while the Bureau’s estimate of unemployment has climbed 31,000, the number of Australians on NewStart fell 30,000...

Neither measure is necessarily more accurate. NewStart doesn’t extend to everyone who is unemployed. The Bureau surveys only 29,000 of the nation’s 8.6 million households.

The deputy governor’s summation: “All this suggests more information is needed before we can draw any firm conclusions about whether or not the labour market is weakening.”

The reticence is important. Along with inflation, employment is the key indicator targeted by the Bank. The “maintenance of full employment” is one of the goals etched into metal on the mural that greets Reserve Bank staff as they walk through the foyer into their offices each morning.

Until the Bank can be certain employment is about to fall there’s not much chance of it cutting rates.

The market thinks it will. Last night it was pricing in two interest rate cuts by the end of the year.

But Battellino told the conference there were “technical reasons why current market pricing may not be giving an accurate picture of interest rate expectations”.

The market had been wrong before. Between late 2002 and late 2003 it priced in cuts that never took place.

Until a clearer picture emerged, the Bank would keep an “open mind”.


Related Posts

. Employment. What if it hasn't stopped growing?

. Employment growth stops. Pity about the promised 500,000 new jobs

. Jobs growth. The damage.


8 comments:

Anonymous said...

I agree. That unemployment data seemed wrong to me.

But cue The Lorax for some vitriol, in 3,2,1....

Kymbos

The Weatherman said...

+1 for the RBS Australia analysis you've linked to. This seems like like such telling research I'm surprised more isn't made of it.

The Lorax said...

Battellino's speech reeked of hubris. It will come back to haunt him.

This was the lowest point, amongst many:

The tech bubble largely missed Australia. In fact, in the late 1990s Australia was constantly being berated for being an old-world economy in that it did not have a home-grown information technology industry. As it turns out, being a heavy user of technology, but not a manufacturer of it, was an advantage.

He's telling a US audience this?! The only thing US has going for it at the moment is technology exports.

He’s gone over there to lecture the Yanks on how silly it is to innovate and invent new technology, and how clever we are to be sitting on a big pile of dirt that China wants for its construction bubble.

Lord give me strength. How on Earth has this man been allowed to reach the heights he has?

Watch Chanos for a different (and much more realistic) perspective on the global economy.

The Lorax said...

Kymbos, even if the employment numbers have been wrong for 10 months (unlikely!) the global economic environment is now worse than toxic. Hardly the moment for businesses to start hiring.

Chris Grealy said...

Successive governments have made it just about impossible to obtain unemployment benefits; so those figures bear very little relation to the actual number of unemployed people. Which of course suits the government just fine.

Peter Whiteford said...

Chris

Actually the number of people on unemployment payments regularly exceeds the number of people the ABS count as unemployed. this is for a number of reasons - like you can combine Newstart with having a part-time job, and some categories of people receiving payments aren't required to look for work.

There are certainly issues about what the different figures mean - and I have been critical about the difficulty of living on Newstart, but in fact successive governments have kept to the standard ILO definition of unemployment for a long time.

Anonymous said...

Unemployment is almost certainly rising for real - there are simply too many negative indicators for one to simply dismiss with a casual wave of the hand. To do so is to be like "Comical Ali" in the Iraq invasion, insisting that US troops were not even in Iraq as their armoured columns were thundering toward the capitol. Two of our largest employment sectors are seriously struggling - to ignore this and attempt to just explain unemployment figures away betrays an attatchment to an ideology which says that it can't possibly be rising.

But I wonder if the RBA is iffy about pushing down interest rates for fear of driving down the $AUSD, possibly creating the opposite effect to the one intended - driving up inflation when consumer spending is already weak.

Senexx said...

Let's see unemployment in my local area is the highest it has ever been.

Those I know involved in small retail are down on sales approximately 85%

Income creates sales. Sales create income. These create jobs.

No one is spending, so there is no job creation. It seems quite logical to me.

Also the measurement of the rise or fall in NS, doesn't tell us anything about those that have gone on to other benefits or given up.

Everywhere in the world is implementing austerity and some of the BRICs are fighting inflation - all this means tightening the belt of government expenditures. So how can there possibly be job creation beyond the boom areas in any country.

Even these are slowing down because the CEOs are taking pay hikes instead of reinvesting. This is the same for many industries here too, look particularly at the FIRE sectors.

Everyone is committing the fallacy of composition of austerity one way or another and that means negative job growth for as long as all sectors are doing this.

Therefore there is a rate cut coming from the RBA by the end of the year.

I suspect 2x25bp or 50bp in February when they meet again if they fail to do any by the end of the year.

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