Economic update: Unemployment, retail and population growth
The ABS employment numbers were a shocker in anyone’s book. Employment declined by 227,700 in May, worse than expected, and the unemployment rate was up to a 19 year high of 7.1 per cent… up from 6.4 per cent in April.
Unemployment horrible but maybe we’re through the worst
Full-time jobs fell by 89,100 and part-time jobs fell by 138,600.
As dire as these numbers are, Chief Economist at Betashares, David Bassanese, says the confusion around the definitions of JobKeeper and JobSeeker have dulled the impact to some extent.
“I think the markets will discount this number as reflecting the definitional issues around Jobkeeper,” he said. “I don’t see this as a shocking blow to the economy, just an acknowledgement of the challenges going forward.”
David noted that the weekly unemployment figures issued by the ABS showed that unemployment actually bottomed out in April.
Despite hours worked down 0.7 per cent in May and the under-utlisation rate up to a new high of 20.2 per cent… David believes that we are through the worst of the recession.
“Typically in a recession, things gradually get weaker and weaker until we reach a low point, and the markets gradually get weaker as the data deteriorates gradually. This time all the weakness has been up front… we were at the worst stage very early on in the recession and we were probably only in recession for two months at most.
“The issue now is that [even though] the rate of change will improve, and employment will continue to grow from here, it’s probably still going to be a fairly gradual recovery… That’s where the markets are going to be challenged.
“Yes the rate of improvement will be there but the level of activity is still going to be quite a bit lower and hence the level of corporate earnings that can justify the sharemarket at certain levels is not going to bounce back in a V-shape either.”
Retail bouncing back
Retail trade rose by a record 16.3 per cent in May (the highest in 38 years of records) after falling a record 17.7 per cent in April and rising 8.5 per cent in March.
The data is a piece of really positive news for consumers and businesses alike. It says that the economy is getting back to normal. The data will especially be heartening for smaller retailers.
Slowly but surely Australia is coming out of lockdown. In March and April Aussies restricted their spending (through choice as well as compulsion) to supermarkets, specialty food stores, liquor outlets and household goods stores… mainly electrical goods and furniture.
But in May, other stores started to re-open, particularly late in the month. It was estimated that 50 per cent of retail outlets were still closed on May 20.
Clothing and shoe shops, and takeaway food outlets were amongst those to re-open later in the month. Certainly many Aussie shoppers had been active buying on-line through the shutdown period but they came into their own when the bricks and mortar stores re-opened.
The Bureau of Statistics reported a doubling of spending at clothing and footwear outlets between April and May.
The month of June will be the first ‘full’ month of trade for many retailers. So a further lift in spending is likely, supported by pent up demand from the lockdown.
Population growth is slowing… don’t forget this is where property demand comes from
Aussie population growth was easing even before the COVID-19 outbreak and international and state borders were shut. Annual population growth hit a 13½-year low of 1.39 per cent in December 2019.
Population growth from immigration is a major driver of most residential property markets… and also the building industry and retail
Population growth rates eased across most states and territories in 2019, led lower by major cities on Australia’s East Coast. Canberra’s population growth rate at 0.99 per cent was the weakest annual pace in 14 years. And annual growth rates have fallen to near 8-year lows in Victoria and NSW. Queensland’s annual population growth rate of 1.57 per cent was the slowest in 3 years.
The resurgence in iron ore mining activity is luring more Aussies and overseas migrants to Western Australia… posting the strongest annual population growth rate in 5½ years.
There were 305,800 babies born in the year to December… a 2-year high and even before lockdown!