How inconsiderate – all those people getting jobs and therefore ensuring further interest rate rises. Watch the mortgage class complain. Don't the poor know their place?
The most consistent aspect of the Australian Bureau of Statistics' labour force surveys over the past six months is their ability to surprise on the up-side, catching even the more optimistic market economists flat-footed. It's just happened again with December's unemployment rate dropping to 5.5 per cent on the headline seasonally adjusted estimate, 5.6 per cent on the better trend guess.
And if you really want to startle yourself about the strength of the Australian recovery, have a peek at the raw figures without any form of adjustment: there were a record 11,047,100 Australians in work last month, a jump of nearly 200,000 and an all-time record as the unemployment rate fell to 5.3 per cent.
No wonder retailers have been quietly doing very nicely, thank-you very much. It's why all the prognostications about the impact of the federal cash splash fading were rubbish.
Statistics being statistics, there's always something for the worrywarts to hang on to – seasonally-adjusted aggregate hours worked fell by one million. That might sound like something, but it's not – it's a miniscule fraction of the 1535.6 million hours actually worked and doesn't really make sense anyway, which is why statistics are revised from time to time. The trend aggregate hours worked rose by 3.7 million.
My suspected reason for why the commentariat has been so consistently wrong about the labour force is that they've never understood just how tight the labour market was before the GFC.
In the real world, the national unemployment rate of around 4 per cent was pretty much full employment. It varied from region to region of course – there are places in Australia where people live to be unemployed while there are others where the semi-able-bodied are in danger of being shanghaied.
In the stronger regions and industries, our brief slowdown was not much more than a chance to pause for breath. The now well-known troika of China, slashed interest rates and Federal spending were able to work their magic on an economy where fear of unemployment never really had much chance to significantly damage consumer confidence.
That also helps explain the apparent contradiction in the labour force figures. According to Economics 101, the unemployment rate shouldn't be falling. While economic growth is below trend and above the growth of the labour force, the unemployment rate should still be edging up even though more jobs are being created.
The problem for the Reserve Bank then is the realisation that there's not much space capacity in the workforce after all and the usual skills shortages are starting to re-emerge. And that can lead to dancing, ie, wage inflation.
Another 25-point rate hike is as good as locked in now for the February RBA board meeting and, if the current trend continues, March is looking like more of the same.
The RBA won't be phased by this week's market beat-up over their Chinese peers starting to tighten policy a little; they're likely to applaud it. And Martin Place already knows about the retailers strength even before some of the major players inform the market.
Beyond interest rates continuing to return to normal, the other key implications are expansion of the last federal budget's temporary reduction in skilled migration numbers and Wayne Swan finding he'll have more tax revenue to play with in the next financial year to reduce his deficit a little quicker.
And, yes, the over-exposed mortgage class will be pitied in the popular press – but it's better to have a mortgage that's becoming more expensive to service than to not have a job. Or to live next to people who don't.
Michael Pascoe is a BusinessDay contributing editor.
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