Westpac has today released its unemployment expectations survey for November, which revealed a solid 2.7% rise, giving back some of October’s 3.9% fall. The index is now 7.2% below the March peak and Westpac believes that we are seeing a trend improvement in unemployment expectations, albeit from very high levels:
In the year to Nov, unemployment expectations are 5.5% higher than a year earlier, a moderation from 8.5%yr in Sep. So while the ABS has reported a modest rise in the unemployment, from 6.0% to 6.2% this year, in terms of momentum households suggest we are past the worst and are expecting it to improve from here. We do caution, however, that the apparent trend peaks in 2012 and 2013 ultimately proved to be false, or unsustained, turning points.
What is different this time is that the business surveys continue to suggest a modest improvement in labour demand. The survey did dip a touch in Oct but if the positive trend continues to unfold, then this would be a more genuine turning point. As such, this watching the various labour market indicators with some interest…
The level of unemployment expectations are still very high which remains a disinflationary force on the economy. But what we have found is that it is the change in expectations, rather than the level, that is more important guide to any possible changes in the stance of monetary policy. The recent trend improvement in expectations is consistent with rates remaining on hold.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
