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Is our economy dismal? No way!

Peter Switzer
17 February 2017

By Peter Switzer

Economics has been branded as the dismal science but that might say a lot about the people who’ve dominated the profession and how a lot of people are disappointed about what the economy doles out to them. Economics also can offer some good news but, on the other hand, it can simultaneously bring bad news.

Yesterday’s job numbers were a case in point, with the headline being a loss of 44,800 full-time jobs! But that was only a part of the story because the unemployment rate actually fell from 5.8% to 5.7% with part-time jobs up 58,300, so the overall employment gain for January was 16,300, when economists tipped 10,000.

Also as CommSec’s Craig James noted: “full-time job creation in the December quarter was the strongest in six years. So it was not unexpected that there would be some pull-back in full-time positions” in the following month.

But that’s not the end of the story, as James informed us that the numbers showed the “biggest lift in employable population in eight years!”

If you need more good news, then you should know that the hours worked were up 0.6% over the month to be 1.2% for the year. This is a measure that suggests more incomes being earned by households.

But there’s more good news with the working age population rising by 33,800 in January – the biggest lift in almost eight years. The working age population rose by 290,400 (1.5%) over the last year, which is the fastest growth in 32 months.

And by the way, rising populations are a positive omen for economic growth because when people go from not having work to getting a job, they spend more, which turns the wheels of the economy.

And while we’re on good news, let’s look at what you might be missing because the media invariably goes long bad news. Here goes:

  • The IMF has upgraded the global economic outlook.
  • China is growing faster than expected.
  • Even Europe is growing faster than expected.
  • The Reserve Bank sees the economy growing at 3% for the next two years and any number around that is good for job creation.
  • The latest business survey from NAB showed business conditions went from 9.9 to 16.2 — a nine-year high and says doing business right now is a ripper! The long-term average is only 4.9! 
  • NAB’s business confidence reading went from 5.7 to 9.8, which is a three-year high. The long-term average is 5.8.
  • Job advertisements rose by 4% in January to 167,164 ads – a five-year high. It was the strongest monthly rise in 2½ years. Job ads are up 7.1% on a year ago.
  • The Westpac/Melbourne Institute survey of consumer sentiment rose by 2.3% in February to 99.6.
  • Iron ore futures beat $US100 late last week and copper hit the highest price since May 2015, surging 4.6% to close at $US6090 a tonne. Copper is a great omen indicator for world growth and we sell this stuff!
  • Australia posted a record trade surplus of $3,511 million in December, up from the $2,040 million surplus in November.
  • Last quarter, CommSec estimated that the terms of trade (ratio of export prices to import prices) likely rose around 4.5%. The actual increase was 4.4%. Based on calculations, they expect that the terms of trade rose by around 12.2% in the December quarter — the biggest lift in incomes in over six years!
  • The Bureau of Statistics (ABS) reported that new vehicle sales rose by 0.6% in January. Sales of SUVs (442,077) hit fresh record highs in annual terms, while annual sales of “other” vehicles stood at 250,630, just shy of record highs.
  • In November, the number of passengers on the Sydney-Melbourne route was up by 4.2% on a year ago to a record 797,669. The Sydney-Melbourne route is also a key measure of business activity. On all domestic flights, passenger traffic rose 2.2% in November compared with a year ago.
  • Retail did ease by 0.1% in December but is up 3% over the year. Non-food retailing fell by 0.5% in December but non-food retailing had risen by 2% in the prior four months. Non-food retail spending is up 3.1% on a year ago.
  • New dwelling approvals fell by 1.2% in December but rose by 7.5% in November. It was the fourth decline in five months. In trend terms, approvals fell by 2.5% – the seventh straight decline. This isn’t great news but dwelling approvals have been really high and there are a lot projects in the pipeline, so they had to go off the boil with the RBA stressing about too much housing activity.

I could go on and I could find some bad news but even in areas of wage rises and lower-than-wanted business investment there are signs that these two trouble spots will become less troublesome over the year.

We have gone 101 quarters without a recession and with Trumpomania driving stock markets and the US President’s policies encouraging global talk of lower taxes, more government spending on infrastructure, less financial regulation and even our Prime Minister finding his mojo via a little bit of Trump inspiration, we will become the world’s greatest growers by some time this year.

That’s worth not being dismal about, isn’t it?

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