RBA Stevens explains better-than-expected labour data

RBA Stevens explains better-than-expected labour data
FXStreet (Bali) – RBA Governor Stevens, during today’s speech at the Anika Foundation, mentioned a few candidate explanations for the better-than-expected set of labour market outcomes.

From RBA Stevens speech text

Perhaps there is statistical noise in the labour force data or maybe future observations or revisions will paint a different picture. It is worth noting here that recent information on Australian population growth suggests that the absolute growth of employment will be revised down somewhat, though this should not significantly affect labour market ratios like the unemployment rate or the employment-to-population ratio.

Perhaps output growth has been higher than the GDP data suggest, in which case upward revisions to those data would probably occur over time.

Perhaps below-trend output growth and trend employment growth can be reconciled in the form of the slower-than-expected growth of wages.

Perhaps trend output growth is lower than the 3 per cent or 3¼ per cent we have assumed for many years. That is, perhaps the growth we have seen is in fact closer to trend growth than we thought.

Some or all of the above possibilities may be at work. Time will tell which ones, but a few observations may be worthwhile at this point.

First, the economy is making the adjustments required, even if it is a bit slower than we would ideally have liked.

Second, if the slow growth of wages has in fact been a significant saver of jobs, that would appear to indicate a degree of labour market flexibility in operation.

Third, to the extent that the data are hinting that our assumptions about trend growth may need to be revisited, that will be worth some discussion. It need not be the case that per capita growth would be any lower, if the lower growth simply reflects slower population growth. So there may be few implications for living standards as measured by income per head. But if there are assumptions about absolute growth rates embedded in business or fiscal strategies, or retirement income plans, they would need to be re-examined.
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RBA Stevens explains better-than-expected labour data
Source: FXStreet