Soft Aussie jobs report adds fuel to rate cut
The January jobs report was poor again. This follows a very bad December where we saw around 50,000 jobs lost in the Australian market. Only 500 jobs were added back in January, and that means that the unemployment rate is now back to 4.1% - the worst in around two years.
In an ordinary world, 4.1% wouldn’t be considered a bad number. But we have to keep in mind that the economy was in a very strong position a year ago, and things have started slowing down strongly since the November rate hike. I still believe that the RBA got it wrong, moved unnecessarily and will cause damage because they won’t want to admit their mistake.
It’s hard to see how things get better given the concurrent slow down in the Chinese economy. China’s inflation rate is negative for the past year. The RBA is watching the US and UK, but it may be missing the market that our exposure to Asia is equally important and our inflation problem is not that same as our Western allies.
Bottom line: The data continues to confirm the Aussie slowdown and the inevitable rate cut sometime later this year after the RBA realises it messed up in November last year. The unemployment rate could continue to rise to the mid 4% range before that consensus and market expectations build. Until then, we’ll have to sit back, wait and observe.
Meanwhile, the residential property market and prices continue to hold strong, thanks to strong migration (still getting stronger) and ridiculously low supply.
Peter Esho is an economist and Founder of Esho Capital. He has 20 years of experience in investments and markets.