Investor snapshot: US next phase; Population up; Retail leads jobs

US Monetary Policy; Population; Employment by industry

¾ US Monetary Policy: Federal Reserve chairman Ben Bernanke has signalled a new phase for the US economy. But bond buying (printing cash) won’t end any time soon.
¾ Population: Australia’s population grew by 1.75 per cent over the year to December – the fastest rate in three years.
¾ Industry employment: Employment rose by just 400 people in the three months to May after gaining 104,900 in the previous three months – the biggest quarterly gain in five years. Strongest sector in the May quarter was Retail trade (up 34,200) while Wholesale trade jobs fell by 32,000.
¾ Chinese economy: The ‘flash’ Purchasing Managers index in china for June was at a 9-month low of 48.3, down from 49.2 in May.

The Federal Reserve will continue to purchase debt at the rate of $85 billion a month and leave the official interest rate between zero and 0.25 per cent. But while the Fed chief Ben Bernanke hinted at an end to bond buying, he noted: “If you draw the conclusion that I’ve just said that our purchases will end in the middle of next year, you’ve drawn the wrong conclusion, because our purchases are tied to what happens in the economy.”

Employment to May 2013

Australia’s population grew by 1.75 per cent over the year to December – the fastest rate in three years. Australia’s population stood at 22,906,352 people at the end of December, but six months later the figure is most likely around 23.1 million.
A record 305,400 babies were born over 2012, up 2.2 per cent over the year but deaths barely moved over the year to 147,000. Overseas migration totalled 235,900 in the 2012 calendar year, the biggest annual total in three years, but below the record high of 315,700 in the year to December 2008.
Across the states and territories, fastest annual population growth occurred in Western Australia (3.47 per cent – fastest on record), followed by ACT (2.30 per cent), Queensland (2.05 per cent), Northern Territory (1.79 per cent), Victoria (1.78 per cent), NSW (1.25 per cent), South Australia (0.95 per cent) and Tasmania (0.08 per cent).

Employment rose in 9 of the 19 industry sectors in the three months to May. Employment fell most in Wholesale Trade (down 32,000) after rising by 39,300 in the previous quarter. Next biggest fall was by Construction (down 20,300) followed by Transport, Postal and Warehousing (down 19,800). Biggest gain in
Record Population WA May 2013

jobs occurred in Retail Trade (up 34,200) followed by Public Administration and Safety (up 14,000) and Arts and Recreation Services (up 13,700).
Healthcare remains the biggest employer with 1.40 million employees (12.1 per cent of the total) followed by Retail Trade (10.8 per cent) and Construction (8.6 per cent).

Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.
The Australian Bureau of Statistics (ABS) provides detailed labour market figures
Revised population data May 2013

one week after releasing ‘top level’ statistics of employment & unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy.

Financial markets have over-reacted to the latest Fed decision. Rather than celebrating the fact that the US economy is starting to stand on its own two feet, investors are fretting about the end to cheap cash. The Dow Jones fell 206 points and the Aussie slumped against a stronger greenback to US93 cents.
This is very much a knee-jerk reaction. The good news outweighs the bad.
Baby boom May 2013

And all the US economic problems haven’t been solved overnight. We are still tipping the Aussie dollar at US95c at end year and All Ordinaries at 5,200 points.

Investors are also over-reacting to the Chinese PMI. The so-called ‘flash’ manufacturing gauge doesn’t line up well to the ‘official’ gauge of manufacturing activity. But if the Chinese economy requires stimulus, authorities are well placed to provide it with inflation controlled.
Provided state and local governments respond to solid population growth then it represents good momentum for economies. That is happening. Businesses are in business because they want to grow and solid population growth assists in that growth.
The job market is effectively flat-lining until the election is out of the way. The lift in retail jobs is clearly a big surprise.

Economic Update