January 24, 2022 by Dymphna

Why there was no ‘pink recession’

Another super-strong set of numbers from the jobs data…

So we got the unemployment data last week, and for me, it underscores how quickly things should bounce back after omicron business passes.

(Which I’m sure it will… right?)

Anyway, the unemployment rate (which only captures what was going on in December, dropped sharply, down to 4.2%.

This is the lowest rate since right before the GFC, and it’s consistent with a lot of what we’re hearing on the ground – labour markets are tight.

In fact, there seemed to be labour shortages all over the place – even before Omicron knocked half the country into the sick bay.

It’s a very strong result, especially when you remember it comes at a time when participation in the labour force is actually increasing, as more and more people get enticed back into the workforce.

In fact, the employment to population ratio has soared to the highest level on record!

Now, there’s still a bit of a story here for the fellahs. Male employment is only just at where it was pre-Covid, where female employment is a touch higher.

We were worried a lot in the early days of Covid about a “pink recession.” Turns out it’s not a thing.

Anyway, male employment should bounce back soon enough.

But it just points to how strong the jobs market – and by extension – the economy actually is right now (if you can look through the fumes of chaos that Omicron has created.)

I mean, job vacancies are booming, as companies struggle to fill roles.

In fact, if you model the number of unemployed people to the number of vacancies, it suggests that unemployment could be much, much lower. It could even be pushing towards 2%.

Now if it did that, that’s going to give households massive confidence, which will get consumption spending going again.

It will also translate into wage gains, as workers take advantage of labour market tightness to push for pay rises or pivot into higher paying roles.

Both of these things – stronger confidence and higher wages – are both factors that will push house prices higher in the short term.

It’s just another reason why I’m not too worried about Omicron right now.

When you look through the noise, the Aussie economy is actually in fantastic shape given what it’s just been through.

We’ll all realise that…

… as soon as we can get this Omicron business behind us.