There are nonetheless credible reasons for the current pessimism: most of the forward labour market indicators have been quite negative, with slumping job ads, lower official vacancies, higher unemployment benefit payments (although this is a lagging indicator), and relentlessly negative media coverage on job losses around the country.
Wednesday's GDP data told us that Australia's economy had expanded at a way "above-trend" 4% pace over the first half of the year, and an equally "above-trend" 3.7% rate over the 12 months to June. As I have noted before, it appears that the so-called "sub-trenders", who kept predicting weak economic growth over 2011 and 2012, were wide of the mark.
But the unemployment data has the potential to provide crucial validation to the school of thought that the RBA is about to cut rates. Importantly, it covers the month of August, so we will have jobs data for two-thirds of the September quarter. In July the jobless rate confounded pessimists by actually declining from 5.25% (revised down) in June to 5.23% in July (see chart). A better description might be that in July the unemployment rate did not increase. A big rise in August to say 5.4% or higher would provide belated affirmation to the argument that the economy is now weakening.
On the other hand, a stubbornly static unemployment rate of around 5.2% would be a substantial surprise to the many who are forecasting worse outcomes in the third and fourth quarters of 2012.
