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.
I 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.
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.