Resilient jobs data could delay more rate cuts

It wasn’t the news we were expecting to hear.

The unemployment rate actually dropped yesterday, falling from 5.3% to 5.2% despite, or perhaps in spite of, analyst predictions that unemployment would rise to 5.5%.

The unexpectedly cheery figures put out by the Australian Bureau of Statistics show the total number of jobs rose by a seasonally adjusted 13,900 to 11,546,400, although full-time employment fell by 4,200 to 8,132,200.

The statistics refused to play ball with the program of doom and gloom played out in newspaper headlines and promulgated by the Federal Opposition.

They show that employment is resilient at the moment and that at least gives SMEs a reason to be optimistic.

The Government is of course ecstatic and Bill Shorten, the Minister for Employment and Workplace Relations described it as “an outstanding achievement” given fragile global growth and record high unemployment in Europe.

For the government the figures were “good Christmas news for hard-working Australians”.

It’s a good news story that contrasts with the falling job ads we saw Monday, the drop in GDP we saw Wednesday and the decision by the Reserve Bank to cut interest rates on Tuesday.

Certainly there are those who argue that the ABS figures are wrong and don’t reflect the reality of the Australian economy, but still survey after survey, the employment figures stay strong.

This means if the RBA looks at the unemployment rate for guidance it is unlikely to sanction another rate cut in February.

A further rate cut was something that had been predicted by analysts, although admittedly probably the same analysts who were tipping a rise in unemployment.

The prediction of no more rate cuts may be disappointing for businesses, which are being squeezed by loan rates, and for retailers looking for the extra stimulus in the form of confident consumers with the benefit of a rate cut in their pocket.

But given that interest rates are now at the lowest they have been since the global financial crisis, a further rate cut could only be a sign that our economy is really in trouble.

That’s the sort of news nobody wants to hear.