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, October 13, 2011

More upside data surprises: unemployment rate falls

They just keep on coming. Lots of positive data "surprises" (to the market, not yours truly) offshore and locally. The last piece of the puzzle is CPI later this month. Here is ICAP's take on UE:

"A decent result, but coming after a 10k all last month and a 4k fall the month prior you can’t escape the fact that employment growth has slowed. The question is why? Is it, as some claim, because the economy is slowing as a result of tight financial conditions or what have you, or is it, as I claim, because of generalised uncertainty caused by a series of disasters followed closely by political uncertainty in the US and Europe.

As I have argued in the past, solid domestic demand in Q1 and Q2 and the recent uptick in partial indicators strongly suggest it isn’t because the economy is slowing – that is, because of financial conditions or anything else. This idea never had any merit and recent data confirms this. Similarly, and up until this month, hours worked had been rising sharply. Consistent with the idea there was definitely a need for more labour. Hours came down this month, given the rise in employment, but they are still elevated suggesting, alongside robust domestic demand, that there is still ample scope for further employment gains.

Recent dataflow firms up my view that, in the absence of Greek default or what have you, there is no case for the RBA to cut. Recent data confirms this is the case, to such an extent that the rate cut call is simply not credible – even if CPI should print on the low side. That’s because, and with domestic demand running at a solid pace, it cannot be assured that a low CPI print was not anomalous. The RBA would open themselves up to ridicule to cut now only to have to hike again early next year, which, if Europe can resolve this political crisis, looks like it will be likely."