Australian Markets Weekly: A cyclical turn in unemployment?
We review last week’s stunning Australian labour market data. While we don’t believe the large moves in either the employment or unemployment rate, we believe the signals – that employment is strengthening (driven by NSW and importantly an improving trend for QLD)
In this week’s weekly:
- A quiet week ahead data wise for Australia, with only the Wage Price Index released together with three RBA speeches and the November RBA Meeting Minutes.
- A 0.6% q/q increase in the WPI will be seen as consistent with low domestic inflationary pressures and giving the RBA flexibility to ease policy further if the economy requires support.
- However, it’s clear the RBA has become more optimistic about the economic outlook, so no further easing is currently being contemplated and indeed NAB retains the view that 2% is likely to mark the low for the Australian cash rate for this cycle.
- In our special focus this week, we review last week’s stunning Australian labour market data. While we don’t believe the large moves in either the employment or unemployment rate, we believe the signals i.e. that employment is strengthening (driven by NSW and importantly an improving trend for Queensland) and to an extent that is sufficient to continue to see the unemployment rate continue to decline. And as suggested in the first chart in the attachment, the unemployment rate is already tracking below the RBA’s November forecasts.
- We also look at the trend for the unemployment rate for both youths (15-24 YO) and the largest 25-34YO age cohorts. In each case, the unemployment rate in each of these age groups appears clearly to be in decline. Historically, these age cohorts have mirrored developments in the national unemployment rate suggesting the national rate may already have turned.
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