RBA to sift through jobs data as world watches Hormuz
Economists will turn their attention to employment figures in Australia this week, but the focus will still largely be on developments in the Middle East.
March labor force figures to be released on Thursday will be the first high-level domestic data to coincide with the Iran war.
But National Australia Bank economists Jessie Cameron and Josh Copeland said it would probably be too early to see the impact of the supply shock reflected in the data, given that the unemployment rate and hiring are lagging behind economic indicators.
NAB predicts that the unemployment rate will remain at a relatively low level of 4.3 percent, with an extra 25,000 jobs expected to be added to the economy.
While the Reserve Bank still believes the labor market is on the tighter side, a 4.3 percent unemployment rate would ease some concerns that the job market is tightening again, NAB economists said in a research note.
The labor market is in good shape going into the war, giving the central bank more leeway to raise interest rates and fight inflation before it has to worry about threatening the full employment aspect of its dual mandate.
“The immediate focus for the RBA…is the domestic inflation outlook and risks around inflation expectations,” Westpac economist Ryan Wells said.
As a result, the biggest impact on inflation right now is what happens to the Strait of Hormuz and how quickly this is reflected in Australian consumer prices.
Westpac chief economist Luci Ellis said last week’s announcement that the Strait would be opened for two weeks during the ceasefire was welcome.
But less encouraging was Iran’s closure of the vital supply route less than 24 hours later in response to Israeli attacks on Lebanon.
“Even if the ceasefire holds well enough to keep the Strait open, an important monitoring point is whether ships will enter the Gulf in the next two weeks, not just whether those previously stuck there have left,” he said.
“If the ships do not enter, the next wave of production will not be shipped. If the ceasefire is not achieved, the delay in refueling will be short-lived.”
While labor market research was the first “hard data” on the ground at the same time as the Iran war, high-frequency “soft data” – particularly hard-core surveys of consumer confidence – suggest its impact on household spending and broader activity may be worse than first thought.
Anecdotally, significant price increases in sectors such as construction paint a similar picture.
The weekly ANZ-Roy Morgan index rebounded from a record low last week after government fuel consumption cuts saved consumers around 32 cents per litre.
The Westpac-Melbourne Institute’s monthly consumer sentiment survey for March will offer a new look at household confidence on Tuesday.
NAB’s business survey on Tuesday will be similarly closely watched; Confidence is expected to decrease and cost pressures will begin to increase.
Markets will hope to understand what the RBA makes of all this when the bank’s deputy governor Andrew Hauser and chief economist Sarah Hunter hold speaking engagements in the US on Tuesday and Thursday.
Wall Street investors were pressing pause heading into the weekend as they watched Middle East peace talks continue on Friday.
US indices closed mixed.
The Dow Jones Industrial Average fell 269.23 points (0.56 percent) to 47,916.57 points, while the S&P 500 lost 7.77 points (0.11 percent) and Nasdaq gained 80.48 points (0.35 percent).
Australian stock futures rose 70 points, or 0.77 percent, to 11,023.
The S&P/ASX200 index fell 12.6 points on Friday, falling 0.14 percent to 8,960.6 points, while the All Ordinaries index fell 13.1 points to 9,155.8 points, down 0.14 percent.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
