The Economy: Jobs Figures Confirm That Economy Is Stronger Than Many Think

The Australian jobs market remains solid across the economy, with the weaker bits in retailing and manufacturing more than offset by the rapidly growing sectors such as resources, healthcare and education.

Australian Bureau of Statistics figures out yesterday show that a total of 46,300 full and part time jobs were added last month, more than offsetting the loss of 29,000 in December.

That was the largest number of jobs created for over a year.

The employment data adds to the growing impression that the Australian economy is gathering pace after being whacked last year by the floods and cyclone Yasi in January and then the uncertainty from Europe later in the area and a slide in business and consumer confidence.

The unemployment rate, seasonally adjusted, dipped to 5.1% (5.2% on the smoothing trend basis) from 5.2% in December (which had been revised down from 5.3%, as had the rate in November.

Despite considerable publicity about job losses (the 500 jobs lost at Qantas yesterday and the 1,000 at the ANZ earlier in the week are the latest manifestations of this belief), the January jobs data from the ABS was strongest for more than a year, reflecting the strength in the economy as a whole.

The strong jobs data confirms the rightness of last week's decision by the RBA not to cut its cash rate.

Unless there's a significant worsening in Europe or in the local jobs market in the next few months, you can just about rule out any more rate cuts.

In fact a rate rise might be in the offing later in the year if we get more months like January for jobs

That doom and gloom has continued and AAP produced a table of recent job losses yesterday.

Roughly 6,000 jobs were lost or could be lost according to the spate of recent announcements from companies large and small, from Qantas, to Caltex, Westpac and the ANZ, not to mention Alcoa.

And everyone of those losses have generated headlines, grim predictions, moans and groans from unions, employers and those involved (who have the biggest reason to gripe, but also to be confident).

But compare that to the 12,300 full time jobs created in January and the more than 46,000 new jobs for the month.

The jobs market is weak, especially in finance, retailing and some areas of manufacturing, but it's strong in others (that is constantly overlooked by the jobs alarmists).

The ABS said there was 11,463,900 people employed in January, which is the highest ever recorded.

"The increase in employment was driven by increased part-time employment, up 34,000 people to 3,400,800, and an increase in full-time employment, up 12,300 people to 8,063,100," the ABS said yesterday.

"The increase in seasonally adjusted part-time was driven by an increase in female part-time employment whereas the increase full time employment was driven by an increase in male full-time employment," the ABS said.

That reversed the trend in December, when it was the absence of part time jobs for females in the group 15 to 24, that helped produced the sharp drop in that month.

It wasn't a case of jobs not going, it was more a case of jobs not appearing at a time when there usually is a surge in part-time positions for the Christmas rush.

The number of people unemployed fell 15,300 people to 614,200 in January, the ABS reported, another strong point.

The ABS monthly aggregate hours worked series showed a decrease in January, down 23.1 million hours to 1,593.9 million hours, which more than offset the 5.6 million hour rise in hours worked in December.

That seems to be reflecting the rises in hours worked in the past couple of months, and the strong rise in part time work last month.

While Europe and Greece remain big concerns (and why the market tanked yesterday), the economy is solid, as new RBA Deputy Governor Phil Lowe said in his first speech for 2012 in Sydney

"... the Australian economy started 2012 in relatively good shape. Growth has been around trend and inflation is consistent with the target, and there are reasonable prospects for this to continue. We also have much more flexibility to deal with unfolding events than almost any other developed economy."

Inflation is down (and will drop at the headline level for the next two quarters), but the cost of some items called non-tradables is starting to concern the RBA because they are not impacted by the value of the dollar - these include rent, communications and utilities.

There was a noticeable pick up in housing finance in December, after the two rate cuts, but it is still at 34 year lows according to some measures and is causing the banks some angst, as is the higher funding costs, domestic and offshore.

While retailing is sluggish, it is not a disaster area that many media writers and industry players would have us believe.

Yes department stories and boutiques are doing it tough. But there are plenty of exceptions.

Wesfarmers' Coles, Bunnings, Kmart and Officeworks all produced higher profits yesterday (Target was the exception) and the performance once again underlined the side of retailing you don't get to read a lot about at the moment: that it is not all doom and gloom.

Women's fashionwear retailer Noni B lifted profit by a bit more than it expected in the six months to December.

The Reject Shop, which was nearly knocked by the impact of the floods a year ago closing a just opened huge distribution centre in near Brisbane, lifted profits in the tough December half year and expects to lift them again this half and open seven new outlets.

Consumer electronics retailer JB Hi Fi wasn't consumed by the slide in TV prices, the rise of the dollar, or weak demand: it survived and reported results slightly better than expected for the December half year.

Online group Carsales.com lifted profit 20% as the car business shows little sign of catching the cold infecting other parts of retailing. Car sales rose in January, which had the best start to a year for five years (since 2007).

Dominos Pizza reported solid sales and profit growth in Australia as the cafe and takeaway sector continues to enjoy solid growth, but with labour problems.

And Westfield Retail Trust, which owns 50% of the Westfield malls in Australia, along with parent Westfield Group, reported solid profits and a perk up in sales in December in its 55 malls across Australia and NZ. Some sectors were weak, such as parts of Sydney, but the group expects sales growth to continue this year.

No doubt the 500 job cuts announced by Qantas yesterday will add to the 'we have an employment crisis'.

On top of the 1,000 cut by the ANZ and Toyota and threatened by Alcoa and others in recent weeks, there's a feeling the economy is under pressure and employment is under siege.

But as the Sydney Morning Herald's Economics Editor Ross Gittins pointed out on Wednesday, anecdotal evidence isn't a good indicator of what is really going on. He points out that employment is still solid.

"In truth, the high dollar and the factors that brought it about are shifting jobs from one industry to another. That's painful for the contracting industries - and we're hearing their cries loud and clear - but we're not hearing much from the expanding industries.

"While jobs are being lost in manufacturing and elsewhere, employment will be growing in mining and construction, pretty obviously, but also in the services sector, including in health, education and training, public administration, the science professions and arts and recreation.

"I'll be surprised if, overall, we don't see continuing growth in employment. Whether this growth will be sufficient to cope with the natural growth in the labour force and thus hold unemployment steady, I'm not as sure, "Gittins wrote.

Many analysts and media commentators still seem gripped by the 'bad dollar' , 'job crisis', multi-speed economy when it has been clear for months that consumption is actually much more solid than the media reports would have us believe.

The resources boom continues to power on, dragging the country in its wake: the new RBA deputy Governor Phil Lowe made a nice point about the chain of impact in his first major speech for the year in Sydney this morning.

"The indirect effects come through a variety of channels. Day to day, they can be hard to see but they do percolate through the economy.

"In effect, there is a chain that links the investment boom in the Pilbara and in Queensland to the increase in spending at cafés and restaurants in Melbourne and Sydney.

"This chain starts with the high terms that the prices that Australians pay for many manufactured goods are, on average, no higher than they were a decade ago, despite average household incomes having increased by more than 60 per cent over this period.

"The stable prices for many goods, combined with strong disposable income growth means there is more disposable income to be spent on services in the cities and towns far from where the resources boom is taking place.

"As I said, this chain can be hard to see, but it is real, and it is one of the factors that have had a material effect on the Australian economy over recent years."

But there is a downside and that's the wrenching change gathering pace, thanks to the changes in spending patterns by consumers in recent years (more on housing and services, less on foods and goods), the rise of the internet which is going to be an ongoing force, and the dramatic impact of the high value of the Australian dollar which will continue for some time to come.

"At the same time, the high exchange rate is having a contractionary effect on other parts of the economy, as it reduces the international competitiveness of some industries," Mr Lowe said.

"Over recent months, the Australian dollar has appreciated despite the uncertainty about the global economic outlook and some decline in commodity prices since mid 2011.

"After adjusting for differences in inflation rates across countries, the exchange rate is currently at around its highest level since the early 1970s.

"In Australia too, we are experiencing events that are historically unusual - a huge boom in investment and a very high exchange rate, both of which are related to the very high level of the terms of trade.

"At the industry level, the picture is a lot more complicated.

"The economy is clearly going through a period of heightened structural change, and this is set to continue.

"Some industries are expanding in relative importance, while others are contracting.

"Given this, it is difficult to be sure how the countervailing expansionary and contractionary forces will balance out."

Keep all this in mind when reading or hearing the latest prophet of doom and gloom about the economy, jobs and current policy.