Has the bottom fallen from the job market? This is what the latest ANZ data for May looks like.
As the next graph shows, the number of job advertisements in May fell by 8.4 percent. That's a lot for a series that's usually very stable.
It's scary-looking data, but ANZ, which collects the data, has some explanations for why they look so bad. They accuse Easter (which fell in April) and the elections. Apparently, the numbers jumped back in the last week of the month.
"When the last week of May is over, job ads will recover strongly in June," said David Plank, director of the Australian Economic Department at ANZ.
But it would have to be an extreme upswing to eradicate such a sharp decline in May. The May decline is the largest one-month decline since January 2010, and in 2010 the overall trend was positive. Now the trend is on the decline, and a sharp fall in May is not likely to be a slip-up, as it's related to many other things we know about the Australian economy.
After all, the Reserve Bank was only forced to cut interest rates to record lows. They do that because the economy is bad, not because it works well. Economic growth has been miserable lately – below 2 percent last year. Wage growth is only 2.4 percent, and if inflation were not so low, wages would decline in real terms. The situation is so bad, and the latest job advertisements confirm this statement.
However, the main reason for looking at the ANZ job advertisement row is to find out what clues it contains for the vital labor force data – the unemployment rate and the underemployment rate. Today, we're getting the latest labor market numbers and the signs from the ANZ job ad line indicate they will be bad.
Do you remember this year? Unemployment was the only bright spot in the Australian economy. For a long time it was getting better and even fell below 5 percent. But in March that changed. The unemployment rate rose in April to 5.1 percent and then to 5.2 percent, as the next graph shows.
The sharp drop in job vacancies can give us a little more assurance that the good times on the jobless market are behind us. This would confirm a general mood in the Australian economy. The retail sector is already in recession, according to the NAB economic survey. And the positive mood in the post-election real estate market also seems to be easing, and clearance rates have dropped again last weekend.
The RBA was concerned earlier this year about the "tension" that it saw between everything else in the economy, which was bad, and the job market, which it considered good. The latest data show that the tension has dropped completely. The job market is deteriorating significantly. (To be honest, it was never as good as they thought, they just did not pay enough attention to wages and underemployment.)
The RBA used this excitement as an excuse not to cut rates earlier. Recent developments in the labor market make this decision rather stupid. They want to cut interest rates before problems emerge, not because they take some time to make an impact. The RBA will probably spend the rest of the year looking up by lowering interest rates at least once more.
There is one way to remedy this situation, and the $ 1080 tax refund for middle-income people will come on the market later this year. That should give the economy a boost that she really needs and it will work fast. Will it be enough? It is time for the government to start spending more money in the economy and not worry about the surplus. The $ 1080 is just a start.
Jason Murphy is an economist. He is the author of the new book Incentivology. Continue the conversation @jasemurphy
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