Australian Economists Warn About Health of Labor Market

Economists are warning the Reserve Bank could cut interest rates again this year, pulling them well below Joe Hockey’s so-called “emergency levels,” because it has admitted it is finding it harder to gauge momentum in the labour market.

The RBA published its much-anticipated quarterly statement on monetary policy on Friday, providing rich insight into its view of the economy.

It shows the RBA has become more uncertain about the health of the labour market, because even though it had anticipated slower employment growth this year, recent forward indicators – such as job ads and vacancies – have been mixed, and there has been strong growth in part-time jobs and workers desiring longer hours.

“The share of workers who would like to work more hours has been little changed over the past two years and is at a high level,” the RBA statement warns.

“That is, the underemployment rate (which captures the number of workers who would like more hours, as a share of the labour force) has not fallen by as much as the unemployment rate over the past year.

“Low growth in a range of wage measures is also consistent with a degree of spare capacity in the labour market.”

The unemployment rate is 5.7%. It has not been below 5.7% since April 2013.

NAB’s chief economist, Ivan Colhoun, said most of the risks cited by the RBA concern a weaker rather than a stronger outlook.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza