• The unemployment rate was unchanged at 4.9 per cent in June. The participation rate edged up from 65.5 per cent to 65.6 per cent. The working age population rose by 19,600.
• Employment rose by 23,400 people in June. Economists had tipped job gains of around 15,000. But the May result was sharply revised lower to show job losses of 500 (previously showed job gains of 7,800).
• Full-time employment rose by 59,000 in June (May jobs were down by 29,400) and part-time jobs fell by 35,600 (Mayjobs rose by 28,800).
• Average hours worked rose 0.5 per cent in June after rising by 0.5 per cent in May. The number of hours worked is up 1.7 per cent on a year ago.
• Across the states and territories unemployment rates in June were: NSW 5.2 per cent (4.9 per cent in May); Victoria4.6 per cent (5.1 per cent); Queensland 5.3 per cent (5.2 per cent); South Australia 5.1 per cent (5.4 per cent); Western Australia 4.2 per cent (4.3 per cent); Tasmania 5.5 per cent (5.8 per cent); Northern Territory 3.7 per cent (3.4 per cent); ACT 4.0 per cent (3.8 per cent).
• Victoria led the job gains in June (up 18,200) followed by South Australia (up 6,900) and Western Australia (up 2,600). NSW led the job losses (down by 17,000), followed by Northern Territory (down 1,000 in trend terms), Tasmania and Queensland (both down 700), and ACT (down 200 in trend terms).

What does it all mean?

• The latest employment data certainly looks robust – especially given the surge of 59,000 new full-time jobs. However it is just one month’s data and the monthly job figures tend to be volatile. Keep in mind that the prior two months saw full-time job losses of almost 80,000. In fact the previous month’s job gains of 7,800 has now been revised to show job losses of 500 people.
• A better indication of the labour market would be the unemployment rate which has effectively gone nowhere for seven months. It is clear that there is a better balance in terms of supply and demand in the labour market. Even annual employment growth rate has eased in recent months from a six-year high of 3.6 per cent to 2.0 per cent in June – the weakest growth rate in 16 months.
• Reading between the lines it is clear that the soft readings on economic activity are being reflected in the job market figures. Manufacturing, construction and the services sector all remain soft, while businesses are trimming new orders and profitability is being affected – given the lack of activity. No doubt the softer economy is ensuring that businesses remain cautious and more circumspect about future hiring.
• Overall the job market is in reasonable shape, but it is now going sideways. Certainly today’s result accords with the views of the Reserve Bank that the job market isn’t overly tight at present. Overall the Reserve Bank will remain hesitant about increasing interest rates anytime soon. CommSec is still pencilling in one rate hike over the next six months but the data flow would have to record a substantial improvement to justify the rate hike.
• Across the states the bulk of the job losses were recorded in NSW – consistent with the other key data releases this week showing weak retail spending and even weaker building approvals. It’s also worth noting that if you add up the employment results for the individual states the job gains total a much more sedate 8,100 instead of 23,400. It seems the seasonal adjustment process is playing a part in the overall result.

The post CommSec: Unemployment rate is a good indicator of job market health appeared first on AdviserVoice.

What does it all mean?

The post CommSec: extended retail slump; building approvals rebound appeared first on AdviserVoice.

What does it all mean?

What do the figures show?

Labour force

• Employment rebounded in March, lifting by 37,800 people. Economists had tipped job gains of 20,000 (range from +5,000 to +30,000 jobs). The February result was revised to show job losses of 8,600 people (previously – 10,100). Full-time employment rose by 32,100 in March (February jobs were up by 50,400) and part-time jobs rose by 5,700 (February jobs fell by 58,900).
• The unemployment rate eased from 5.0 per cent to 4.9 per cent. The participation rate rose from 65.7 per cent to 65.8 per cent.
• Over the past four months employment has lifted by 44,100 or just over 11,000 jobs per month – below the growth rate of new entrants. And trend job growth in March was 8,600. Overall it is clear that employment is growing at a more sustainable pace.
• Average hours worked rose by 0.8 per cent in March after lifting by 1.2 per cent in February.
• NSW has the highest unemployment in the nation at 5.8 per cent. Across the states and territories unemployment rates in March were: NSW 5.8 per cent (4.9 per cent in February); Victoria 4.5 per cent (5.0 per cent); Queensland 5.5 per cent (5.6 per cent); South Australia 5.4 per cent (5.8 per cent); Western Australia 4.2 per cent (4.2 per cent); Tasmania 5.6 per cent (5.6 per cent); Northern Territory 2.4 per cent (2.4 per cent); ACT 3.2 per cent (3.3 per cent).
• Employment rose most in Western Australia (up 12,900) followed by Queensland (up 11,900), South Australia (up 7,400), Victoria (up 6,500), and Northern Territory (up 800), Tasmania (up 700), ACT (up 100). Jobs fell 5,200 in NSW.
• The working age population rose by 18,900 in March after lifting by 19,200 in February. The working age population grew by 1.66 per cent over the past year – the smallest gain in over five years.

What is the importance of the economic data?

• The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.
• If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.

What are the implications for interest rates and investors?

• CommSec believes that official rates will stay on hold for the next three months. We still believe rates will rise – but gradually – pencilling in rate hikes in August and November.
• Overall, the job market is healthy, pointing to strong housing and retail spending in the second half of 2011.
• The main constraint on the economy is jobs. If the Government isn’t proactive in boosting labour supply it will be held responsible for mining and engineering projects that don’t go ahead, any delays in rebuilding in Queensland and if wages start to accelerate, boosting interest rates.

The post Jobs up, but slowdown clear over time appeared first on AdviserVoice.

• Employment fell by 10,100 people in February – the biggest decline in 18 months (since August 2009). Economists had tipped job gains of 20,000 (range from -10,000 to +35,000 jobs). The January result was revised sharply lower to show growth of 7,700 people (previously +24,000). Full-time employment rose by 47,600 in February (January jobs were down by 12,300) and part-time jobs fell by 57,700 (January jobs rose by 20,000).
• The unemployment rate was unchanged at 5.0 per cent. The participation rate fell from a downwardlyrevised 65.8 per cent to 65.7 per cent. The working age population rose by 19,200.
• Average hours worked rose by 1.1 per cent in February after falling by 0.8 per cent in January.
• Across the states and territories unemployment rates in February were: NSW 4.8 per cent (4.9 per cent in January); Victoria 5.0 per cent (5.1 per cent); Queensland 5.6 per cent (5.6 per cent); South Australia 5.8 per cent (5.4 per cent); Western Australia 4.2 per cent (4.6 per cent); Tasmania 5.6 per cent (6.4 per cent); Northern Territory 2.3 per cent (2.4 per cent); ACT 3.5 per cent (3.4 per cent).
• Employment rose most in NSW (up 22,400) followed by South Australia and Northern Territory (up 400). Jobs fell most in Queensland (down 22,100) followed by Western Australia (down 10,600), Tasmania (down 500) and Victoria and the ACT (both down 200).

What does it all mean?

• There are clear signs that the Aussie economy is losing momentum. Jobs are now falling, adding to data showing stagnant retail spending, weak housing market and contracting activity in manufacturing, services and construction sectors. Over the last three months employment has fallen by 2,300 people and this highlights that the recent weakness is not an aberration. In fact employment started to slow before the floods and cyclone hit.
• The rapid fire rate hikes and sluggish consumer activity is starting to show cracks in the labour market data. More and more businesses are telling us that conditions are tougher now than at the height of the global financial crisis and earlier this week the NAB business survey highlighted the weakness in business trading conditions. Profitability is being squeezed, the employment index remains weak and forward orders are being pared back – all a clear sign that businesses are finding times tough.

• The Reserve Bank had warned that the job market would slow, and clearly it got that one right. The central bank has also been anticipating a softening of conditions in the labour market going forward – in line with the weak growth forecasts for the first half of 2011. In fact the Reserve Bank expects the unemployment rate to only slide by 0.5 per cent over the coming two years. No doubt in the longer term an improvement in productivity and a pickup in skilled migration is what is needed to ensure that these forecasts are met. The jobs data gives the Reserve Bank further reason to stay on the interest rate sidelines.
• Not only did employment fall in the latest month but the January result was sharply downgraded. While the good news is that full-time jobs in the month, it is important that the figures are not taken too literally. It is hard to believe that full-time jobs would soar almost 48,000 just as part-time jobs were falling by almost 58,000. The volatility over the last few months means that trend estimates are probably more accurate and these show a slowdown in job creation.
• Again it’s hard to believe that Western Australian jobs would fall at the same time the unemployment rate was easing. Or that unemployment in Tasmania could fall from 6.4 per cent to 5.6 per cent in the space of a month.
• It is important to highlight that the data is backward looking, capturing how the economy was tracking around 4-5 months ago. And even more forward looking indicators like the job ads series suggest that while employment growth will remain a feature it is likely to be a less robust in the near term.
• Overall it is unlikely that the Reserve Bank will be pursuing further interest rate rises anytime soon. While CommSec had expected the next rate hike to take place in May, there is clearly an array of risks to our call. And if activity levels remain subdued over the next couple of months it is possible the anticipated May rate hike could be pushed out by a number of months.

What do the figures show?

Labour force

• Employment fell for the first time in 18 months in February, falling by 10,100 workers. Full-time employment rose by 47,000 after falling by 12,300 in January. Part-time employment fell by 57,800 after rising by 20,000 in January.
• The annual employment growth rate eased from 3.3 per cent to 3.0 per cent.
• The unemployment rate remained steady at 5.0 per cent. The participation rate eased from 65.8 per cent to 65.7 per cent.
• Average hours worked rose by 1.1 per cent in February after falling by 0.8 per cent in January. Over the year average hours worked rose by 2.3 per cent.
• NSW (up 22,400) led the job gains in February, followed by South Australia and Northern Territory (up 400). Jobs fell most in Queensland (down 22,100) followed by Western Australia (down 10,600), Tasmania (down 500) and Victoria and the ACT (both down 200).
• Across the states and territories unemployment rates in February were: NSW 4.8 per cent (4.9 per cent in January); Victoria 5.0 per cent (5.1 per cent); Queensland 5.6 per cent (5.6 per cent); South Australia 5.8 per cent (5.4 per cent); Western Australia 4.2 per cent (4.6 per cent); Tasmania 5.6 per cent (6.4 per cent); Northern Territory 2.3 per cent (2.4 per cent); ACT 3.5 per cent (3.4 per cent).
• The working age population rose by 19,200 in February after lifting by 19,000 in January. The working age population grew by 1.80 per cent over the past year – the smallest gain in 50 months.

What is the importance of the economic data?

• The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.
• If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.

What are the implications for interest rates and investors?

• CommSec expects the jobless rate to ease to around 4.5 per cent over the coming year. But if the Federal Government was to provide a much needed boost to labour supply by lifting the migrant intake and easing work visa restrictions, the job market may not need to tighten as much as expected.
• We expect the job market to remain relatively healthy particularly in the second half of the year. However the job market may trend sideways for the next couple of months. Our equity media analysts maintain their hold rating on SEEK Limited
• We are hearing that global fund managers are looking to exit positions in Australia, concerned by our softer economy and uncertainty about proposed taxes on carbon and the resources sector. The high Australian dollar and softening in the job market are yet further reasons for investors to be looking at economies in the upswing phase with the key candidate being the United States. While we are not revising down our sharemarket forecasts, they are under review.

The post Biggest fall in jobs in 18 months appeared first on AdviserVoice.

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 2.9 cents per litre to 139.2 cents a litre in the week to March 6 – a near 29 month high. Over the past three weeks the national average price has lifted by 4.4 cents per litre.
• Motorists are likely to see a further increase in petrol prices over the coming weeks. While the Singapore unleaded price has lifted by more than US$15 a barrel in the past three weeks, it has only partially filtered through to the terminal gate (wholesale) price – which gained 6 cents a litre in the last three weeks. CommSec expects pump prices to rise by a further 4 cents a litre in the next fortnight.
• Job market looks set to tighten further. The Advantage internet job index rose by 6.1 per cent in February. The ANZ job ads index rose by a 1.2 per cent in February after an upwardly revised 3.0 per cent rise in the prior month.
• The construction sector is still contracting despite a modest improvement. The Performance of Construction index rose by 4.4 points to 44.6 in February.

What does it all mean?

• At present petrol prices are going only one way – up. Petrol prices have surged by almost 3 cents a litre in the past week and are holding near 29-month highs and unfortunately for motorists it is unlikely to get any better over the next couple of weeks.
• The political instability in the Middle East and North Africa is the key driver of near term prices. And given the current tensions in the Middle East, the Singapore unleaded price has surged by over US$15 a barrel in the past three weeks and is holding at 30-month highs. Unfortunately for motorists the Australian dollar can only do so much, and as such most of the increase in the global oil price will need to filter through to domestic pump prices.
• The terminal gate price (wholesale) is certainly responding, lifting a sizeable six cents a litre since bottoming out three weeks ago. CommSec expects prices to increase by 4 cents a litre in the next fortnight, taking the national average price to around $1.44 a litre. At the high point of the discounting cycle petrol will be trading well above $1.50 a litre.
• The labour market has been the shining indicator over the past year and the latest job ads data suggests that employment growth is likely to be healthy in coming months. The Advantage job index has once again tracked higher after a bout of recent weakness, while the ANZ job ads series has once again shown moderate growth. Importantly while the labour market is likely to strengthen in coming months it is unlikely to see robust growth akin to 2010 – especially given that the domestic economy has lost momentum in recent months.
• The labour market will be one of the key hot issues that the Reserve Bank will be focusing on in coming months. As long as the supply of labour remains adequate, the Reserve Bank can remain on the interest rate sidelines.

What do the figures show?

Petrol prices:

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 2.9 cents a litre to 139.2 cents a litre in the week to March 6. The metropolitan price rose by 3.0 c/l to 139.1 c/l, while the regional average price rose by 2.7 c/l to 139.3 c/l.
• Average petrol prices across states over the past week were: Sydney (up 2.1 cents to 138.7 c/l), Melbourne (up 3.5 cents to 138.7 c/l), Brisbane (up 3.0 cents to 140.7 c/l), Adelaide (up 4.8 cents to 139.5 c/l), Perth (up 3.2 cents to 138.8 c/l), Darwin (up 4.1 cents to 143.1 c/l), Canberra (up 0.3 cents to 134.0 c/l) and Hobart (up 3.1 cents to 144.1 c/l).
• Today, the national average wholesale (terminal gate) stands at a near 29-month high of 133.7 cents a litre, up 3.7 cents a litre over the past week.
• Last week, the key Singapore unleaded petrol price rose by US$4.83 (4.1 per cent) to US$123.60 a barrel – a 30 month high. And in Australian dollar terms the Singapore gasoline price rose by $4.68 (4.0 per cent) over the week to $121.88 a barrel.

Performance of Construction:

• The Performance of Construction index rose by 4.4 points to 44.6 in February. Any reading below 50.0 indicates the sector is contracting. Houses, apartments, and commercial construction were all below 50, while the engineering sector expanded after contracting in the prior month.

Job advertisements:

• The Advantage internet job index rose by 6.1 per cent in February. Job ads were strongest in the ACT (up 15.3 per cent) followed by Queensland (up 8.3 per cent), NSW (up 6.4 per cent), Western Australia (up 6.1 per cent), Victoria (up 4.9 per cent), South Australia (up 4.4 per cent), and Tasmania (up 1.5 per cent). Across sectors, gains were recorded for Transport (12.8 per cent), Administration, clerical and office support (11.4per cent) and trade services (10.3 per cent). Declines were recorded only in education (-0.8 per cent).
• Similarly the combined number of internet and newspaper job advertisements, as tracked by ANZ, rose by 1.2 per cent in February after a upwardly revised 3.0 per cent increase in January. Internet job ads rose by 1.0 per cent in the month, while newspaper job ads rose by 4.4 per cent. In annual terms job ads are up 19.3 per cent.

What is the importance of the economic data?

• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum. National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions.
• The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• The monthly Performance of Construction Index is a gauge of operation conditions across residential, commercial and engineering construction. The PCI is useful not just in showing how the construction sector is performing but in providing some sense about where it is heading. The key ‘forward looking’ components are orders and employment..

What are the implications for interest rates and investors?

• The lift in the price of petrol is further bad news for motorists, taking precious spending dollars out of consumer pockets. Retailers already have to contend with the effects of the weather on seasonal spending, consumer conservatism and higher utility prices.
• Filling up the car with petrol is the single biggest outlay that Aussie households make each week so changes in petrol prices have a big impact on the budget and spending patterns. The average household is paying almost an additional $30 a month more on petrol compared with just over six months ago.

The post Petrol at 29-month highs and rising appeared first on AdviserVoice.

The big picture

• The Reserve Bank Governor isn’t one to gloat. But you can certainly sense from the latest interest rate decision that Glenn Stevens is pretty pleased with the state of the economy. Of course it is not just the Governor that can take credit for our laudable circumstances, it is the Reserve Bank Board more generally, as well his executive officers.
• Certainly there is a nice balance to the economy at present. Consumers are reluctant to spend but investment in the resources sector is picking up. The job market is strong, but future employment growth is expected to slow and skill shortages are confined to the resources sector. The floods have caused production losses but rebuilding will provide a mild boost to the economy.
• And then there is inflation – which the RBA continues to describe as ‘moderate’ – with strong competition in some markets, lower wages and a high exchange rate all combining to push underlying inflation to the lower half of the target band.
• Of course, no one said setting monetary policy was easy. Consider the challenges that the economy has faced over the past few years. There was the global financial crisis, a situation that prompted the Reserve Bank to do a ‘U-turn’ on monetary policy and also prompted the government to insulate the economy by boosting spending. And you know what? It worked. Of course there was also the small matter that the economy was very strong just before the GFC struck. And we can also thank the impeccable timing of the Chinese industrialisation.
• With the GFC out of the way, the Reserve Bank wasted no time in lifting interest rates back to ‘normal’ levels. Again, that was not without its risks. If it hiked rates too quick, the economy would risk losing momentum at a crucial juncture. And if it hiked rates too slowly there was the risk that all cylinders would be firing at the same time, leading to higher inflation.
• There is plenty of debate about whether the last rate hike was a step too far, but the Reserve Bank Board can breathe easy for now. The upturn in the Asian economy, and thus demand for Australian raw materials, have served to offset weakness in consumer spending and residential and commercial construction.
• The new age of consumer conservatism has been another challenge for the Reserve Bank Governor together with the renewed uplift in the terms of trade (ratio of export prices to import prices) and, more recently the floods and Cyclone Yasi.
• Now the $64 million dollar question is how long the Reserve Bank will stay on the interest rate sidelines. A rate hike in April can be ruled out, with attention turning to May. But if underlying inflation in the March quarter is still restrained by competition and the exchange rate, then rates are set to stay on hold until perhaps August.

The week ahead

• Last week the ‘autumn avalanche’ hit, with investors inundated by a plethora of economic data releases. The dust is starting to clear, but there is still a healthy offering of statistics on the radar screen over the coming week.
• The week kicks off with the Performance of Construction index to be issued on Monday together with the latest figures on tourist arrivals, departures and migrant flows. The construction industry is doing it tough at present but conditions in the tourism sector are more mixed, despite the lofty Aussie dollar.
• On Tuesday the NAB business survey is released. It’s fair to say that business conditions are challenging at present with conservative consumers, floods, cyclones, rising raw material prices and a firm currency all providing headaches in one shape or form. Businesses will certainly feel more chipper when consumers become more confident.
• And that provides the appropriate lead in to the consumer sentiment figures to be released on Wednesday. In February, the confidence index lifted modestly. But when you smooth out all the bumps, the trend index hit the lowest levels in 20 months. It is hard to see how sentiment could have changed markedly over the past month.
• Also for release on Wednesday is the January housing finance data. Home prices have flattened over the past few months and this has served to bring more buyers out of the cupboards – even with the double-whammy rate hike in November. Lending probably rose by 1.0 per cent in January after lifting by just over 2 per cent in December.
• On Thursday, the latest data on inflation and unemployment expectations will be issued alongside the monthly job data. The job market remains tight, due in large part to Government restrictions on migrant numbers. Employers have no alternative to take on marginal workers and train them up given that they can’t obtain the appropriate skilled staff from abroad. We tip a 20,000 increase in jobs with unemployment around 4.9/5.0 per cent.
• Turning our attention overseas, there are only slim pickings on the US economic calendar over the coming week. On Monday consumer credit figures are released with weekly department store sales on Tuesday and wholesale sales and inventories on Wednesday. On Thursday international trade, weekly jobless claims and monthly federal budget figures are released with retail sales and consumer sentiment data on Friday.
• Economists tip a slight widening in the trade deficit, from US$40.58 billion to US$41.5 billion. And retail sales are expected to have risen by 0.4 per cent in February with a similar 0.4 per cent rise if autos are excluded. US retail sales are surprisingly stronger than the situation in Australia. And if employment rises as expected, sales will get a further kick along.
• Also of note, all of the top-shelf Chinese economic data releases will be issued on Friday including retail sales, production, investment, and the all-important inflation figures.

Sharemarket

• The earnings season is over for another six months, and by and large the results were encouraging. In aggregate, the ASX 200 companies that reported their half-yearly results had earnings up 25 per cent on a year ago with cash on hand up almost 24 per cent. And when you add in the companies reporting full-year earnings, cash on hand at the 152 companies stood at $102.5 billion, up 25 per cent on a year earlier. In short, Aussie companies have cut debt and lifted cash levels to ensure that they are well prepared to meet the difficulties ahead – and there are a few. The Aussie dollar is still high, making life difficult for exporters, import-competing businesses, global companies and retailers. Then there are the vagaries of the weather, providing further challenges. Consumers still won’t spend. And raw material prices are at lofty levels and continue to rise.
• Overall company profits are still outpacing share prices. The gap should close by share prices lifting to meet the higher earnings, but of course the difficulty is working on when, and how quickly, this will occur. CommSec believes that a combination of solid earnings and a lower Aussie dollar will serve to drive the sharemarket higher in the second half of 2011. We are sticking to our view that the All Ordinaries/ASX 200 will be near 5,400 points by end year.
• Happy Anniversary! On March 6 2009 the All Ordinaries fell to lows of 3111.7 with the ASX 200 at 3145.5. But it was at that point that the new bull market began with investors concluding that stocks had fallen too far in response to the global financial crisis. In the period since, the All Ords has rebounded by just over 57 per cent with the ASX 200 up almost 53 per cent. Investors that have held the faith have been rewarded.

Interest rates, currencies & commodities

• Our currency strategists are sticking with their long-held forecasts – and with good reason, because they remain on the money. The Aussie dollar had been expected to be around US102 cents at the end of March, and that still appears a reasonable bet. The US economic expansion was expected to broaden, raising the prospect of higher US interest rates, and lifting the greenback – especially over the second half of the year. That view also looks reasonable given recent data. The CBA strategists are tipping the Aussie dollar to ease to around US99 cents in June, US94 cents by September and US92 cents by the end of the year.

The post Investor Signposts: Week Beginning March 6 2011 appeared first on AdviserVoice.

• Weak consumer spending. Retail spending grew by just 0.2 per cent in December, below expectations centred on a rise of 0.5 per cent. In the December quarter, inflation-adjusted retail trade fell by 0.3 per cent – the first fall in 15 months. The measure of retail prices fell by 0.1 per cent in the quarter. Prices fell in seven of the 15 detailed sectors in the quarter.
• Books in; cafes out. Unpublished data shows that Aussies spent up big on newspapers and books in the December quarter together with hardware items and clothing. But spending on shoes was slashed while people made fewer visits to cafes & restaurants.
• Mixed signals on the job market. The Advantage internet job index fell by 0.4 per cent in January after falling 2.3 per cent in December. The ANZ job ads index rose by 2.4 per cent.
• Construction is sliding. The Performance of Construction index fell by 3.6 points to 40.2 in January – the lowest reading since July 2009.

What does it all mean?

• Over the last three months of 2010, more Aussies decided to get lost in a good book in their breaks from painting, decorating and home renovation projects. At the same time we made fewer outings to cafes & restaurants, bought fewer shoes and cut back on take-away food, toys and video games. Overall it seems that the average consumer has gone back in time to when life was simpler.
• It also seems that we are eating less – perhaps finally waking up to the obesity problem. For the second straight quarter, spending on food (in inflation-adjusted terms) has been cut with specialty retailers like butchers, bakers and fruit and vegetable shops seemingly the hardest hit.
• All the anecdotes from retailers have been spot on – we just aren’t in the mood to spend. Spending over the Christmas period was extremely weak with higher interest rates, electricity rates and petrol prices seemingly the main factors causing us to cut back.

• More and more retailers are feeling the bracing winds of deflation, or falling prices. In fact around half of retail sectors saw prices fall in the December quarter.
• The bad news is that picky consumers aren’t even being enticed by cheaper prices. Despite retail prices falling 0.1 per cent in the December quarter, spending went backwards by 0.3 per cent.
• It’s not all bad news for retailers. With the job market tight, wages rising and wealth at record highs, there are good reasons for consumers to start spending again. But it will require the Reserve Bank to take an extended period on the interest rate sidelines.
• Employment growth is showing mixed signals. The Advantage job index has tracked lower for two consecutive months while the ANZ job ads series has shown more subdued growth. Overall the result would please the Reserve Bank given its recent forecasts for a more sedate pace of growth in the labour market.

What do the figures show?

Retail trade (December month):

• Retail trade rose by just 0.2 per cent in December after lifting 0.4 per cent in November. Over the last five months, retail spending has gone nowhere. Over the past year retail trade rose by just 2.1 per cent.
• Spending fell most in South Australia and Tasmania (both down 1.3 per cent) with spending in the ACT down 0.5 per cent and Western Australian spending down 0.2 per cent.
• Sales by chain stores and other large retailers fell by 0.1 per cent in seasonally terms in December while sales by smaller retailers rose by 0.6 per cent. In annual terms sales at both chain stores and smaller retailers were up 2.1 per cent on a year ago.
• During December, sales increased most at footwear and jewellery outlets (up 3.6 per cent) followed by electrical and electronic goods retailers (up 2.5 per cent) and clothing outlets (up 2.3 per cent). Spending fell most at butchers, fruit & veg and other specialty retailers (down 3.1 per cent).

Retail trade (December quarter):

• Retail trade fell by 0.3 per cent in real (inflation-adjusted) terms in the December quarter after rising 0.5 per cent in the September quarter. Annual growth fell from 2.7 per cent to a two-year low of 1.1 per cent.
• The measure of retail inflation – the retail deflator – fell by 0.1 per cent in the December quarter after 0.7 per cent growth in the September quarter. Annual retail inflation fell from 1.1 per cent to 0.8 per cent in the December quarter. Deflation – falling prices – occurred in seven of the 15 retail sectors in the December quarter.
• In real terms, spending rose most in the quarter at newspapers & books outlets (up 6.1 per cent) but spending on footwear slumped by 8.4 per cent with visits to cafes and restaurants down 7.3 per cent.
• Compared with a year ago, newspapers & books spending is up 13.0 per cent in real terms with furniture & floor covering sales up 7.1 per cent. But at the other end of the scale spending at butchers, fruit & veg and other specialty retailers were down 9.5 per cent.

Performance of Construction:

• The Performance of Construction index fell by 3.6 points to 40.2 in January. Any reading below 50.0 indicates the sector is contracting. Houses, apartments, engineering and commercial construction were all below 50.
• The PCI is at the lowest level since July 2009 with the employment component the lowest since March 2009.

Job advertisements:

• The Advantage internet job index fell by 0.4 per cent in January. Job ads were weak in ACT (down 9.5 per cent) and Queensland (down 5.8 per cent) but strongest in Western Australia (up 5.8 per cent). Across sectors, gains were recorded for human resources (4.7 per cent), education (3.2 per cent) and sales and marketing (2.4 per cent). Declines were recorded for transport (-8.8 per cent), legal (-8.1 per cent) and tourism (-2.7 per cent).
• By contrast the ANZ job ad index rose by 2.4 per cent in January after lifting 1.2 per cent in November. But the index provides no break-up across states or industries.

What is the importance of the economic data?

• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• The monthly Performance of Construction Index is a gauge of operation conditions across residential, commercial and engineering construction. The PCI is useful not just in showing how the construction sector is performing but in providing some sense about where it is heading. The key ‘forward looking’ components are orders and employment.

What are the implications for interest rates and investors?

• Day by day the Reserve Bank is being presented with more reasons to stay on the interest rate sidelines. Key sectors like manufacturing, services and construction are going backwards while deflation is taking a greater grip on the retail sector. And while retailers are cutting prices in an attempt to move stock, it seems like retailers aren’t interested.
• We just don’t know how long the current bout of consumer conservatism will last. The longer-term outlook for retailers is positive though with the job market still healthy, wages rising and wealth at record highs.
• The key issue for policy makers is to maintain a healthy labour market. As the Reserve Bank highlighted in last week’s Monetary Policy statement unemployment is forecast to only fall by about half a per cent over the next two years. A rise in productivity, weaker employment growth and a pickup in skilled migration should ensure that excessive wage growth is well contained.
• We can’t rule out the possibility that the Australian economy could experience a modest technical recession over the December 2010 and March 2011 quarters.

The post Frugal shoppers stay home with a good book appeared first on AdviserVoice.

• Employment rose by just 2,300 people in December, well below forecasts centred on job gains of around 25,000 (range from +10,000 to +40,000 jobs). The November result was not revised – recording job growth of 54,600 people. Full-time employment rose by 1,700 in December (November jobs were up by 55,400) and part-time jobs rose by 600 (November jobs fell by 800).
• Despite the meagre job growth, the unemployment rate fell from 5.2 per cent to 5.0 per cent. The main reason for the drop in unemployment was an apparent fall in the number of people in the workforce. The participation rate fell from a record high of 66.0 per cent to 65.8 per cent. The working age population rose by 19,700.
• Average hours worked fell by 0.2 per cent in December but rose by 2.8 per cent over the year.
• Across the states and territories unemployment rates in December were: NSW 4.6 per cent (5.0 per cent in November); Victoria 4.9 per cent (5.5 per cent); Queensland 6.0 per cent (5.6 per cent); South Australia 5.6 per cent (5.6 per cent); Western Australia 4.4 per cent (4.5 per cent); Tasmania 5.0 per cent (5.4 per cent); Northern Territory 2.6 per cent (2.7 per cent); ACT 3.3 per cent (3.2 per cent).

Click here to download this document (pdf)

The post Employment slows: A case of lies, damned lies and statistics? appeared first on AdviserVoice.

New figures raise questions about how tight the job market really is.

• As at June 2010 there were almost a quarter of a million families (244,900) where one or both spouses were unemployed (3.9 per cent of all families).
• There were over 134,400 families with children under the age of 15 where either the husband or wife were out of work. And there were 64,000 families where neither parent (or lone parent in one-parent families) had a job.
• Around one in six workers in the hospitality sector want to work more hours. Overall, just over 7 per cent of all employed workers want to work more hours.
• Just over one in five of all workers have been with their current employer for less than 12 months.

What does it all mean?

• New data challenges the perception that the job market is super tight, in essence backing up the views of the Reserve Bank. While more people are in jobs than ever before, many aren’t working the number of hours that they would like. And there are still a large number of families where either the husband, wife or sole parent are out of work. One reason that Aussies are not spending like they used to is because many still can’t get jobs or aren’t able to work the number of hours that would enable them to meet everyday living costs.
• While many extol the strong conditions in the job market it is salutatory to note that there are 64,000 families where there is no major breadwinner – that is, neither the husband, wife nor sole parent has a job. Clearly one of the priorities of the Federal Government over the next year should be for all families to have at least one of the parents in the job market.
• Around one in six workers employed by retailers, hotels, cafes and restaurants want to work more hours. The large numbers of workers in admin and support jobs as well as those employed in the arts and recreation sector are also crying out for more work. Contrast this with the mining sector where workers are very satisfied with the hours they are working with few complaints by those working in utilities like electricity, gas and water businesses.
• Around one in five people have been with their current employer for less than a year. When combined with the number of people that are still out of work or want to work more hours it is understandable that consumers are cautious with their spending.

What do the figures show?

Labour market statistics

• As at June 2010 there were 6.27 million “families” in Australia. Of the 5.22 million “couple families” there were 192,200 families where one or the spouses were unemployed. Further there were 11,300 couple families where neither spouse had a job.
• Of the 938,300 single parent families, 50,000 had the parent unemployed. And of the 110,900 “other families”, 2,700 had the family reference person out of work.
• As at November 2010, 7.4 per cent of all workers were underemployed. That is, these employed workers want, and are available for, more hours or work, whether they be in full-time or part-time employment. The underemployment rate stood at 17.2 per cent in Accomodation & food services; 14.1 per cent in Retail trade; and 12.5 per cent in Administrative & support services.
• At the other end of the scale, the unemployment rate stood at 0.4 per cent in Mining; 1.7 per cent in Electricity, Gas, Water and Waste Services; and 2.7 per cent in Financial and Insurance Services.
• Workers in the retail sector are more likely to leave their jobs voluntarily in the search for new positions. In November 2010, 29,200 unemployed workers indicated that they left their last job in the retail sector voluntarily. In contrast only 20,500 of unemployed retail workers say that they were asked to leave their last positions.
• Further 23,100 unemployed workers indicated that they left their last job in the Accommodation & food services retail sector voluntarily while 16,200 say they “lost” their last job.
• By contrast only 400 workers in former workers in Electricity, Gas, Water and Waste Services say they left their last job in the sector voluntarily. And only 1,500 unemployed workers say that they left their last job in the Information media and telecommunications sector voluntarily.
• Most people in jobs expect to be working in 12 months time. Of all workers, 90.8 per cent believe they will still be working but 82.5 per cent of those thatr have been with the same employer for less than a year still expects to be working in a year’s time.
• Interestingly, 20.2 per cent of all workers have been with their current employer for less than a year.

What is the importance of the economic data?

• Australian Labour Market Statistics is a publication released quarterly by the Bureau of Statistics and provides data that enables more detailed analysis of trends in the job market such as labour utilisation.
  What are the implications for interest rates and investors?
• The latest jobs data throws new light on why people aren’t spending. In essence there are a host of families that are still affected by unemployment, where people have been in jobs for a short time or where people want to work more hours but can’t get the extra work.
• The Federal Government will need to focus on the job market “have-nots” over the coming year. While most believe the job market is in good shape, many families would question that belief.
• Job market confidence will need to improve much more before consumers are more willing to spend freely. Retailers need to be mindful of the true position of the job market.
• The Reserve Bank will be in no rush to lift rates in coming months. The Bank has already questioned just how tight the job market is, but many economists have failed to fully analyse job market data.

The post Almost 250,000 families hit by unemployment appeared first on AdviserVoice.