Two comdoll economies, Australia and New Zealand, just released their employment reports. Labor data, such as employment change figures and jobless rates, are typically considered leading indicators of economic activity since these can determine the fate of consumer spending and future production levels – two of the major components of an economy’s GDP.
Without further ado, let’s take a look at who’s hiring and who’s firing:
New Zealand’s latest economic figures were as grim as Mordor as quarterly employment change slipped by 0.1% in Q2 2012, pushing its overall unemployment rate from 6.7% to 6.8%. This was particularly disappointing since analysts estimated a 0.3% uptick in hiring for the quarter, which could’ve effectively brought joblessness down to 6.5%.
With the recent slump in hiring, New Zealand reached its worst unemployment level since June 2010. A quick walk down memory lane would also reveal that the last time New Zealand posted a quarterly decline in hiring was in December 2010.
A closer look at the figures shows that the city of Canterbury was to blame for biting off a huge chunk in hiring as it shed roughly 19,000 jobs during the period. This just goes to show that the city hasn’t completely recovered from the series of earthquakes in early 2011, as it saw joblessness jump by a full percentage point to 6.5% in the past quarter.
On a more upbeat note, the number of hours worked rose by 1.7% in New Zealand during the quarter, implying that laborers increased their productivity and were able to take home a bit more dough over the past three months.
Still, the dismal jobs data confirms that the New Zealand economy is operating below its full capacity, as Westpac economists pointed out. Other economists were also quick to note that the sharp drop in hiring for the second quarter was enough to erase the progress made in Q1 2012.
Because of that, the Reserve Bank of New Zealand (RBNZ) probably won’t be in any rush to hike rates this year. Heck, economic hotshots are even predicting that New Zealand’s central bank will keep rates at 2.50% until mid-2013!
Meanwhile in the Land Down Under, the month of July delivered a sweet little upside surprise as it added 14,000 jobs to the employment pool, taking Australia’s unemployment rate down to 5.2%. Most economists had only predicted jobs growth of 10,200, and the unemployment rate was expected to stay at 5.3%, so you can imagine how excited the markets were to see such strong results!
And really, it couldn’t have come at a better time, as the previous month printed horrific employment figures. July’s performance was a nice recovery from the slump we saw in June, a month that saw job losses of 28,300 (initially reported at 27,000).
In any case, the latest report marks the fourth monthly gain in the last five months, which just goes to show how resilient Australia has been despite threats of a global economic slowdown.
From the looks of it, it seems as though the Reserve Bank of Australia’s (RBA) rate cuts in May and June has had a positive effect on the economy, eh? But how will this affect the central bank’s decisions going forward?
Well, the RBA’s own forecasts indicate that they had thought unemployment would rise. So if you ask me, policymakers may relax, allow its past rate cuts to take full effect, and hold back on further easing in the meantime!
It’s quite odd seeing these two countries that are so alike print out such different employment results. But what I’m really interested in finding out is if these diverging employment stats will somehow work themselves into diverging central bank stances.
After all, while New Zealand’s latest employment figures make the RBNZ more inclined to back off from hiking rates in the near future, Australia’s makes the RBA more likely to hold off on further easing.
That being said, can a case be made for a long-term long position on AUD/NZD? I don’t know about you, but I know I’ll be keeping my eye on this pair from now on!