AMW: Labour market recovering more quickly than expected
Traditionally the labour market has been a lagging indicator of activity. However, in this pandemic it is largely contemporaneous and is thus a good summary indicator of the wider economy as well as being timely given new data sets such as weekly payrolls and regular job ad updates by SEEK and Indeed.
Australia’s labour market has recovered around 50% of the job losses associated with the pandemic. Last week’s employment data showed that recovery continued in August with 111k jobs against expectations of -35k, while unemployment fell seven-tenths to 6.8% from 7.5%. In contrast hours worked rose a more meagre 0.1%. That surprising strength was driven by a sharp recovery in self-employed in original terms, leading some to question the veracity of the labour market recovery seen to date.
While we have some reservations around the August data, the recovery in the labour market seen to date is occurring across a broad range of indicators such as payrolls (where we get another update on Tuesday) and in job ads which in some states are now above pre-pandemic levels. All of that recovery is occurring outside of Victoria which currently remains in lockdown – hours worked in Victoria are down 12% from pre-pandemic levels compared to the rest of Australia which is now only down 3%.
Going forward the conversation is turning to how quickly the Victorian labour market can recover as Victorian virus numbers fall to be within re-opening benchmarks. A tentative Victoria recovery will also take place as the JobKeeper and JobSeeker programs start to taper and it will be important to watch activity outside of Victoria to see whether the tapering results in a slowing in the pace of recovery.
Australia: RBA’s Debelle speaks on Tuesday and will be closely watched to see whether the RBA is indeed contemplating further policy easing as the Minutes suggest. Datawise the main pieces are Payrolls on Tuesday, and preliminary reads for Retail Sales on Wednesday and the Trade Balance on Friday. Payrolls are for the week to September 5 and will be watched closely to see whether the stabilisation in Vic payrolls has continued and whether the data confirms the extraordinarily strong employment figures for August last week.
International: Another central bank focused week. Across the ditch the RBNZ meets on Wednesday and while there is unlikely to be much change to guidance, negative rates are still seen as likely in 2021. UK: BoE Governor Bailey speaks Tuesday where he will no doubt be asked how likely the BoE is to take rates into negative territory. EZ: Key global PMIs are Wednesday and will provide an indication whether the pick-up in the virus is impacting activity. US: Fed Chair Powell testifies three times this week, as Congress continues to debate the size of a 4th fiscal package.
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Chart of the week
Victorian virus numbers continue to fall and hours worked recover outside of Victoria
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