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Hedge Clippings | 18 October 2024 Most economists are now convinced that yesterday's monthly labour force numbers released by the ABS have ruled out any chance of a rate cut this side of Christmas. For the record, for the past six months the unemployment rate has stayed steady around 4.1%, with 64,000 people joining the workforce in September, and the number of unemployed falling by 9,000. As the ABS pointed out, employment has risen by 3.1% in the past year, faster than the civilian population growth of 2.5%, taking the employment-to-population ratio to a new historical high of 64.4%. Even so, there are now 616,000 unemployed people, 90,000 more than there were in September last year, although that number is 93,000 fewer than there were pre-Covid when unemployment was at 5.2%. If those numbers sound confusing to you, join the club, but the ABS seemed to be able to make sense of them, as we suppose real economists do, which is what matters. Of course, behind the numbers were more details which caused a slanging match between the Treasurer Jim Chalmers and the opposition employment spokes-person, Michaelia Cash, who pointed to the fact that the majority of jobs growth in the past year - around 70% - has been in the government or "non-market" sectors of health, education and public service, leading to claims that the government was simply increasing the size of the bureaucracy to create jobs. Drilling down further, about 90% of the increase in hours worked was also in the non-market, and presumably lower-paid, sector. If you're one of those who are now employed the argument is academic (like so much of what goes down in Canberra) - a job is a job, and wages are wages - but it does emphasise another aspect of the current two speed nature of the economy. Private sector jobs are more likely to be higher paid, and one would think they in turn lead to additional flow on economic (jobs) growth. Meanwhile, back to the RBA, who had forecast that unemployment would be rising to 4.3% by the end of the year, which barring any unforeseen surprises, now seems unlikely. Hence the view from economists that the RBA will lag their overseas counterparts who have already started to cut rates in line with easing inflation. A speech this week from Sarah Hunter, RBA Assistant Governor (Economic) was entitled "Inflation Expectations - Why They Matter and How They Are Formed" and gave an inkling into the RBA's thought process. We're neither going to try to summarise it here (you can follow the link yourself if you'd like to) - nor claim to fully understand it all, but possibly the old saying that "perception is reality" sums it up: If everyone's perception is that inflation is high (and the media and one side or other of politics would suggest that it is) then that is the reality. As a result, it affects people's and businesses' economic decisions. However, Hunter finished her speech with the conclusion (amongst others) that it's a good news story with respect to expectations: Short-term expectations appear to be converging towards long-term ones, and recently they have been working to bring price expectations down faster. So maybe the RBA will deliver the experts (and borrowers) a surprise before Christmas after all? News & Insights New Funds on FundMonitors.com Manager Insights | Seed Funds Management Market Commentary - September | Glenmore Asset Management September 2024 Performance News Bennelong Concentrated Australian Equities Fund Glenmore Australian Equities Fund |
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