Australia saw its strongest May jobs growth in eight years with 42,000 jobs added in the month and the jobless rate fell to 6.0% from a revised 6.1% in April, according to the ABS. The improvement was “driven by increases in part-time employment for females (up 29,800) and full-time employment for males (up 15,900)”. The participation rate remains at 64.7%, revised from an earlier 64.8%. Many economists questioned whether the data was accurate. The ABS cautioned that it had uncovered anomalies in its data including an ‘unparalleled surge in May of 35,000 and pointed to the changing patterns in the way people responded to its monthly survey. “As the ABS is unable to remove this impact from the original estimates, care should be taken in comparing the original and seasonally adjusted estimates, particularly for Western Australia,” the ABS said.
AMP Capital’s Shane Oliver said, “It’s premature to conclude that the unemployment rate has peaked … Another rate cut at the August RBA meeting remains a 50/50 proposition.”
ANZ said, “The unemployment rate continues to move down against expectations of further increases through 2015. However, we believe that the strong gains experienced in recent months will not be sustained. Economic growth is still below trend, and is likely to remain so, while the likelihood of further job losses in the mining industry will also apply upward pressure to the unemployment rate.”
St George senior economist Janu Chan said, “A falling unemployment rate and healthy job growth is somewhat puzzling given that economic growth has been below trend.”
UBS economist George Tharenou said, “Today’s data was far better than expected … But interestingly, this contrasts Q1 GDP data which showed nominal household disposable income dropping to a 12-year low of 2.5% year on year. Overall, the improvement in the labour market is a welcome development, and will give the RBA some comfort to sit back and hold the cash rate ahead.”
Morgan Stanley economist Daniel Blake said, “We reiterate our concerns about data quality, given the standard deviation of ±23k over the past two years. We remain sceptical of the improved jobs and hours worked momentum, and expect unemployment to rise further, while the RBA should reconfirm its easing bias.”
RBC Capital Markets strategist Michael Turner said, “The data doesn’t gel with other measures like ANZ’s jobs ads. For the Reserve Bank, there is no implication in the near term.”
JPMorgan chief economist Stephen Walters said, “We weren’t forecasting any more moves from the Reserve Bank and when you get numbers like these it’s even less likely that the bank’s going to have to move again.”
CommSec economist Savanth Sebastian said, “What a sweet set of numbers! … The Reserve Bank can comfortably wait on the sidelines and let the economy evolve in the low inflation environment.”
Capital Economics economist Daniel Martin said, “The reading almost certainly exaggerates the strength of the labour market, while the sharp drop in corporate profits over the last year suggests that far weaker employment growth lies ahead. We still think the Reserve Bank’s view that the unemployment rate will peak at 6.5% is too optimistic, and we expect it to cut rates later in the year.”