The comdolls have recently seen a string of poor headline jobs data, but are they as dismal as they appear? Let’s find out! Join me as we take a closer look at the employment data for Australia, New Zealand, and Canada!
The latest Australian jobs data shows that employers cut jobs in April by 2.9K which is understandably worse than the expected 4.0K increase in jobs. The jobless rate also rose by 0.1% to 6.2% while the labor force participation rate remained flat at 64.8%. Analysts point to Australia’s weakening mining industry due to lower Chinese demand for Australian commodities, namely iron ore, as the primary reason for the poor jobs data.
An appreciating Aussie dollar was also pointed out as hurting the competitiveness of local industries, forcing some of them to downsize their workforce. And the RBA meeting minutes did explicitly state that the desire to strengthen the labor market was one of the considerations for the recent rate cut.
The RBA minutes also stated that “the delayed pick-up in GDP growth in the revised outlook meant that the unemployment rate was forecast to rise further, before starting to decline gradually.” Yikes!
On the surface, New Zealand’s jobs data is arguably more dismal than that of Australia’s, but like the hunchback of Notre-Dame (I only saw the Disney movie and yes…I watch Disney movies), a closer look may yield a different point of view.
New Zealand’s quarterly employment change showed a mere 0.7% increase in jobs versus the expected 0.8% increase and the previous period’s 1.2% increase. The jobless rate also remained flat at 5.8% but the labor force participation rate increased by 0.2% to 69.6%. This is a positive development because it means a larger percentage of the working-age population joined or re-joined the labor force, promising higher productivity and consumer spending down the road. But does the quarterly labor cost index or wage growth–which was worse than expected at 0.3% (0.4% expected, 0.5% previous)–offset this?
Apparently not. While wage growth was worse than expected, it was still above CPI (0.1% for March quarter) so real wages (wages adjusted for inflation) were still increasing and purchasing power was not diminished.
But lower inflation has its own problems too. With regard to wages, workers are going to have a harder time negotiating for wage increases, dampening consumer spending in the long run. With lower consumer spending, demand for goods and services would be lower too. And this vicious cycle would make it harder for the RBNZ to reach it’s 2% inflation target, making a rate cut a possibility if conditions remain the same (or weaken) as time goes by.
Like New Zealand, Canada’s jobs data was pretty bad on the surface too, but looked a little bit better upon closer inspection.
Canada’s jobless rate remained flat at 6.8% for the third consecutive month, slightly better than the expected 0.1% increase to 6.9%. Canada’s employment change, though, showed a very surprising 19.7K jobs lost in april versus the expected drop of only 4.5K. This is the biggest drop in four years.
Pretty dismal, huh? Not exactly. A closer look at the available data shows that part-time employment dropped by 67,000 but this was mostly offset by a 47,000 increase in full time jobs, and full time jobs are preferable because they are generally more stable. And stable jobs means stable incomes and higher consumer confidence. The total number of hours worked also increased by 0.9%, indicating potentially higher productivity.
Overall, the Canadian labor market seems slightly weak but resilient, which could mean the Loonie may remain stable for forex traders in the short-to-medium term.