Conflicting data…what to believe?
Yesterday we received news that the Chinese economy is slowing much faster than expected. But then strong employment data indicated that Australia’s economy is still booming.
Is Australia… booming…or busting?
The boom part is employment. According to the Australian Bureau of Statistics (ABS), the national unemployment rate fell to 4.9%, the lowest level since the GFC. That’s the official version.
According to Roy Morgan research the unemployment rate in April was 9.3%. They say a further 8.2% of the workforce is underemployed.
The reason behind the big difference in unemployment rates comes down to definitions. Roy Morgan defines an unemployed person as one,
‘looking for work, no matter when. The results are not seasonally adjusted and provide an accurate measure of monthly unemployment estimates in Australia.’
The ABS on the other hand,
‘classifies an unemployed person as part of the labour force only if, when surveyed, they have been actively looking for work in the four weeks up to the end of the reference week and if they were available for work in the reference week.’
In other words, the ABS doesn’t count those who have given up looking for work as unemployed. They refer to such people as ‘marginally attached’ to the labour market.
Whatever the case, employment data is a lagging economic indicator. It doesn’t really tell you what’s coming.
Chinese trade data doesn’t tell the future either but yesterday’s numbers were horrible. Year-on-year import growth was just 0.3% for April. The market expected 11% growth. So much for the Chinese consumer coming to save the world.
Of course, it’s only one month’s data. But Chinese households are the most financially repressed in the world. The government has siphoned their wealth by holding down the currency and interest rates. The fruits of their labour have flowed into China’s record FX reserves.
Don’t bet on the Chinese consumer anytime soon.
Things are getting interesting, dear reader. Economic reality is once again triumphing over central banking hubris. Expect the calls for more money printing to grow louder…
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