The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Thursday, July 8, 2010

UBS: Monster rise in jobs

This is the summary from UBS's economists today:

Booming jobs mkt: +46k in June, 5.1% UR

* June jobs surge 45.9k (a 5 year high of 3.3% y/y)

Employment surged by 45.9k in June, much stronger than expected (mkt & UBS: 15k), after a modest downward revision in May to a gain of 22.8k (was 26.9k). This is the 9th rise in 10 months, lifting the y/y to an equal 5 year high of 3.3%, from 2.5%. The 3m annualised pace in Q2 was strong at 3.0% (after 3.8% in Q1).

* Q2 hours work lift 1.3% - consistent with strong GDP growth

Hours worked eased back only by 0.4% in June, after jumping 2.8% last month. The y/y remains strong at 3.2%, after a 2 year high of 4.1%. Quarterly hours lifted a strong 1.3% q/q - the highest in 5 years also - picking up from 0.3% in Q1 (2.6% y/y after 0.8%). This is consistent with our view of a pick-up of GDP growth in Q2 to a strong 1.1% q/q (3.0% y/y). Full-time jobs rose another 18.4k m/m - the 10th straight rise (2.7% y/y), while part-time rebounded 27.5k (after 4 falls, 4.8% y/y).

* Unemployment rate keeps moving lower…now 5.1%

The unemployment rate was steady at 5.1% in June – albeit below UBS & mkt for 5.2%, after May was revised down 0.1%pt – the lowest since Jan-09 (& below the 5.8% peak in mid-09). The participation rate edged up to 65.2%, from 65.1%.

* Implications – strong jobs increase the chance of RBA rate hike

This is another very strong report, with a monster rise in jobs, a consolidation of the leap in hours-worked, and a 5.1% unemployment rate. Leading indicators have been pointing to a pick-up in jobs growth to about 3% y/y - but we got there already with a 5 year high of 3.3% y/y in June. Hence, while they still suggest ongoing solid jobs growth ahead, we are perhaps close to a peak. Despite activity data disappointing somewhat recently, the jobs data adds weight to our forecast recovery of private demand from mid-year, and increases the chance of an RBA hike in August - albeit still a close call (UBS: +25bp). Market pricing for a near-term rate cut appears unlikely to be validated on this data. Key over the next few months (apart from Q2 CPI) will be the extent to which the forward looking indicators of employment (job ads and business surveys) react to global market jitters and worries over growth prospects – after relative resilience so far.