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Unusual recovery job ads smaller states

Analysis

The main conclusions suggested by a more detailed look at trends in WA job ads, which along with Tasmania and the Northern Territory now exceed pre-COVID levels are:

• Many of the smaller states’ economies are benefiting from both better virus numbers along with relatively smaller exposures to business services/smaller CBDs;
• The recovery in job advertising holds out the prospect of a near-term stabilisation in unemployment rates in these smaller states, though unemployment is likely to continue to rise sharply in Victoria in coming months; and
• In the medium term, much still depends on the interplay of infection rates and the removal of government assistance, primarily the JobKeeper and JobSeeker programs but also numbers accessing early superannuation withdrawals. These programs have played a very substantial and positive role supporting the Australian economy during this very difficult pandemic period. The phasing down of these levels of support will be a considerable drag on the economy beginning in Q4, unless there is excellent progress controlling the virus and reopening continues apace. Otherwise, further government spending in the 6 October Budget is likely to be necessary to avoid quite a weak Q4 GDP outcome, although it’s likely by then that Victoria will be emerging from its strict lockdown.

The week ahead

• A very busy week ahead. In Australia the final pieces of the Q2 GDP puzzle, which will be revealed on Wednesday, where we expect to see the Australian economy contracted by around 5% in Q2 (most of that early in the quarter) before recovery commenced through May and June, before the renewed Victorian lockdown. Partial data released in recent days has shown the government’s support package has significantly supported the economy, meaning a smaller contraction than first predicted. The RBA Board Meeting on Tuesday isn’t expected to see any change in policy or messaging, but the Board has continued to remind that the package of measures introduced in March could be adjusted if circumstances warranted.
• Internationally, after the Fed signalled last week that it had moved to an average inflation target of 2% and would permit inflation above 2% after periods of undershooting, a speech by Governor Clarida on the Monetary Policy Framework on Monday night is arguably the highlight of an otherwise busy week. In response to the Fed’s shift in its framework, the US$ has weakened again, pushing the $A to the highest level in over two years and leading to some rise in very longer-dated yields on medium-term inflation concerns. Other international news includes Chinese and US PMIs and the latest update on US employment and unemployment.

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