The ABS employment numbers were a shocker in anyone’s book. Employment declined by 227,700 in May, worse than expected, and the unemployment rate was up to a 19 year high of 7.1 per cent… up from 6.4 per cent in April.
Full-time jobs fell by 89,100 and part-time jobs fell by 138,600.
As dire as these numbers are, Chief Economist at Betashares, David Bassanese, says the confusion around the definitions of JobKeeper and JobSeeker have dulled the impact to some extent.
“I think the markets will discount this number as reflecting the definitional issues around Jobkeeper,” he said. “I don’t see this as a shocking blow to the economy, just an acknowledgement of the challenges going forward.”
David noted that the weekly unemployment figures issued by the ABS showed that unemployment actually bottomed out in April.
Despite hours worked down 0.7 per cent in May and the under-utlisation rate up to a new high of 20.2 per cent…David believes that we are through the worst of the recession.
“Typically in a recession, things gradually get weaker and weaker until we reach a low point, and the markets gradually get weaker as the data deteriorates gradually. This time all the weakness has been up front… we were at the worst stage very early on in the recession and we were probably only in recession for two months at most.
“The issue now is that [even though] the rate of change will improve, and employment will continue to grow from here, it’s probably still going to be a fairly gradual recovery… That’s where the markets are going to be challenged.
“Yes the rate of improvement will be there but the level of activity is still going to be quite a bit lower and hence the level of corporate earnings that can justify the sharemarket at certain levels is not going to bounce back in a V-shape either.”