The March employment report was a pleasant shock after months of generally soft economic news. Employment rose a nice 44,000 in March after monthly changes of -15,400; +48,100; -36,600 and -3,700 in the prior 4 months. The numbers are clearly very choppy, but it is a great to the statistical noise in the data turning up for this month at least. I hate to say it, but I will - let’s look at the April employment result in a month’s time to see if the March jump in jobs is just statistical volatility or a change in trend.
That said, total employment growth over the past year was a puny 0.3%, more than a full percentage point or more than 100,000 jobs lower than the long run average. That sort of trend for employment growth fits almost perfectly with the recent national accounts which showed that GDP rose at a floppy 2.3% through 2011 having been stuck below a 3% pace for almost 4 years.
The unemployment rate was steady at 5.2% in March and it has been all but unchanged in the last 6 or so months having previously risen from below 5% early in 2011. The unemployment rate is still near historical lows but is still more likely to edge up given the ongoing sub-trend growth.
The monthly jobs report will be viewed by the RBA with some relief although its judgment about what to do next will no doubt influenced by the raft of activity indicators which point to GDP growth remaining below trend, at least in the near term.
The monetary policy implications of the better data must tilt the balance a little towards a 25 basis point rate cut in May and away from 50, but there is still plenty of water to flow by in the next 19 days until the RBA meets. A look over the horizon would still point to the RBA cutting 50 basis points given global and market trends, plus the fiscal tightening in place.