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Australian employment data not disastrous say ANZ Bank, but the foreign exchange markets don't agree

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Category: The Australian Economy

Published on Thursday, 12 July 2012 10:09

Written by Sam Coventry

The foreign exchange markets have reacted rather aggressively to the latest eco-stats out of Australia. See our reports, "The Australian Dollar "Can No Longer Escape The Sell-Off" and "Pound sterling in powerful advance against the Australian dollar."

The employment report for June shows overall employment fell -27k (cons. 0k) and the job losses were entirely of the full-time variety.

Danske Bank analysts say the data shows the increasing division between resource and non-resource led activity within the Australian economy.

However, ANZ Bank have sought to calm nerves over the data:


"Today’s labour force data and other timely indicators are consistent with Australian labour market conditions remaining soft, but not disastrous, in recent months: the unemployment rate has started to drift a little higher; the employment-to-population ratio has eased again; average hours worked are trending lower; and job ads have fallen modestly in recent months," says a note from ANZ.

Indeed, ANZ Bank advise that they continue to expect that Australia’s unemployment rate will drift a little higher in the near term, which is consistent with the RBA’s view.

"Given this and that the Bank focuses more on the unemployment rate than the highly volatile monthly employment data, today’s data alone are unlikely to cause too much concern within the RBA. We recently pushed back to October our previous call for a policy rate cut in August, and kept a November cut pencilled in – this call is unaffected by today’s data. Job ads are the key data to watch," say ANZ.

But foreign exchange markets have fallen sharply, suggesting that the ANZ analysis is at odds with the broader market.

UBS advise that they see a rate cut coming in August:

"Our Australia economists conclude that the data – and the recent relapse in leading indicators of employment – suggests the unemployment rate will rise further and so they stick to their forecast that the RBA will cut the cash rate again by 25 bp in August, assuming Q2 CPI is low enough," says Gareth Berry at UBS.