New economy leading the labour market. ABS data suggest that the bulk of job creation has occurred in “new-economy” sectors such as healthcare and professional, scientific and technical services. Indeed, these sectors account for roughly 80% of the 232K jobs created in 2015 to date. In contrast, “old-economy” sectors, such as mining, manufacturing, and retail have shed jobs. The data point to smooth re-balancing of the economy.
■ But employment is at odds with GDP. According to the NAB survey, the fastest growing sectors are also the ones creating the most jobs. But the ABS data suggest otherwise. Indeed, according to the ABS data, there is now a -17% correlation between employment and output across sectors – a -2-sigma event in history. This raises doubts about the integrity of the ABS data, at least at a sectoral level. We have concerns about the aggregate data too. Of the 232K jobs created in 2015 to date, 174K jobs have come from technical factors, such as sample rotation.
■ RBA challenged to look through labour market data and cut rates. The RBA has been reticent to cut rates, as it awaits evidence that the economy is slowing more sharply than forecast. Recently solid labour market data have been supportive of the Banks’ stance. However, leading indicators point to a stalling labour market, despite what the official data are suggesting. In this context, the economy needs more stimulus. And in the absence of timely fiscal stimulus, the onus is on the RBA to do more.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
