Shoots Are Greener in Australia?

by Stubborn Mule on 7 May 2009 · 2 comments

The phrase de jour (or du mois in fact) in financial markets is “green shoots”. Optimists, world equity markets included, are seeing tentative signs of improvement in the world economy. Google trends saw a blip in searches for the phrase green shoots back in January when UK Government minister Baroness Vadera used the phrase and was lampooned for what was perceived as premature optimism. Moving forward a few months and searches have surged again, but this time consensus seems to be far more supportive of a positive outlook.

Champions of the botanical analogy in Australia have had some help from the Australian Bureau of Statistics (ABS) over the last couple of days. Yesterday Australian consumer spending took most analysts by surprise, printing an increase of 2.2% when the median forecast had been for a more modest 0.5%. Surprising though this figure was, it was quickly explained away as the result of people anticipating their Government stimulus payment and going shopping on the credit card before actually receiving the money. Today’s employment number was much harder to explain. The consensus was that total employment would fall in April 2009 by 25,000. The more pessimistic forecasters expected a fall of closer to 50,000 and no-one I am aware of expected employment to rise. But that is exactly what it did: employment was up by 27,300 (in seasonally adjusted terms). Growth in full-time employment was stronger still, growing by 49,100. Part-time employment did fall by 21,800, some of which probably represents a transition from part-time to full-time work.

Now, admittedly employment figures are based on surveys and so are noisy. But, the ABS estimates that the standard error for the employment number is 41,700 (36,800 for full-time), which suggests that even if the real figure is really lower, employment conditions in April were still probably better than anyone was expecting. While the green shoots theory is a global one, the economic data is starting to suggest that Australia continues to be better positioned than much of the rest of the world. The chart below* shows the history of the unemployment rate here and in the US. After many years of being used to having higher unemployment than America, over the last couple of years our labour market has proved more resilient. US unemployment figures will be released on Friday and it will be very interesting to see whether unemployment there continues to worsen, widening the gap between the two countries.

unemploymentI have written before about Australia and the global financial crisis, looking at the extent to which we have been better insulated from the worst of the crisis than the US. Partial insulation combined with significant Government stimulus appear to be supporting our economy. Nevertheless, optimists should be aware that green shoots are fragile, and there will continue to be big economic challenges for Australia, not just the rest of the world.

* Data sources: Australian Bureau of Statistics, Bureau of Labor Statistics

UPDATE: on Friday, the US Bureau of Labor Statistics published US employment data. Unemployment was up to 8.9%, so for now the US and Australia are continuing to diverge.

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{ 2 comments… read them below or add one }

1 earl June 6, 2009 at 8:35 am

Or is it green mould forming on something that is still dying?? I, along with 10% of my fellow workers, was retrenched in March and remain out of work. Im not registered as unemployed as currently my wife is still working and we are surviving off the redundancy. Unless I secure a job in the next few weeks I will have to investigate the process of registration and I will become “visible” from the un/employment point of view. I dont think Im a unique case……

2 stubbornmule June 6, 2009 at 5:38 pm

@earl: There’s no doubt that the “invisible” unemployed like yourselves are significant in number. Some estimates for the overall rate of labour under-utlisation (i.e. visible and invisible unemployed) for Australia are as high as 11.2%. Have a look here too.

Personally, I am a somewhat skeptical of the current enthusiasm for “green shoots”, but even if conditions do deteriorate further there are signs that Australia will not be hit as hard as the US and certainly not as hard as the UK. The way Rory Robertson puts it, the US and the UK are on track for the worst downturn since the Great Depression, Australia is “only” on track for the worst recession since the 1990s. Of course, that’s only good news in a relative since as the 1990s recession in Australia was a painful one. Of course, a more pessimistic view (which I hope is wrong) is that global downturns always hit Australia with a lag, so there’s much worse to come and we won’t be better off than the US and the UK. Fingers crossed and good luck in your job hunting!

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