Latest unemployment figures are out

[ok180]

and in turn a strong willed govt can turn a deflationary environment into an inflationary one.

There's not a lot the government can do unfortunatly. Government can never replace business which is what they are all trying to do atm. Now is a great time for them to be building all the roads, hospitals etc and training people for the future. There is little they can do to actually help the situation happening now. The problem is a tightening of credit markets government have to solve that to resolve the problem.

 

[Nommy]

If u think The stimulus packages, fhog grants, lower interest rates, broadband network and plenty more to come is not going to make a difference you are kidding urself. Global quantative easing will see huge de valuations in global currencies which will only lead to an increase in real assets and the cost of goods and services. This is a huge redistribution of wealth and for those holdind and saving their pennies, watch out. The purchasing value of Ur $'s ain't gonna get any better. Inflation is the hidden tax on middle and lower income earners, retirees and pensioners. Don't underestimate the govts ability to change the rules. We are already seeing this being done.

 

[yorke]

8% is definately not the end of the world. The way things are going, 8% will be a great outcome, and will mean property will hold up nicely.

There is at least 4% of the population refusing to work, we've seen this during the boom when employers had to import unskilled/semi skilled labour to fill vacant positions, so yes the 8% is great news. During the 80's and 90's recession when unemployment rates went above 10% the vast part of unemployed were non English speaking new arrivals, oldies with paid mortgages who volunteered to get retrenched and young school leavers still living at home with mum. None of these groups have a major impact on property prices so if history repeats itself there is not much to worry even if unemployment peaks at 10%.

But I'm sure that in an attempt to make prime time news some fruit loop will come out and predict unemployment rates at 15%+ soon enough.

 

[HealthyWealthy]

This is a property investing forum isn't it..??

Unemployment is certainly a lagging economic indicator, but it's a leading indicator as far as property prices go.

Funny that this should be brought up today...I just saw an economist being interviewed who made precisely the point that in the current environment, unemployment is a lead indicator because, as he said, each of those people who become unemployed are likely to have mortgages, credit cards and other commitments. The more people who lose their jobs, the more those facilities are likely to be underutilised or defaulted upon with obvious consequences.

 

[topcropper]

There is at least 4% of the population refusing to work, we've seen this during the boom when employers had to import unskilled/semi skilled labour to fill vacant positions, so yes the 8% is great news.

Dunno if it's great news, better than double digets I suppose.

Yep, less than 4% unemployment is full employment. Those without a job 12 months ago were unable to hold a job due to being handycapped or too lazy or stupid or incompetant.

So 8% unemployment is important. It means that 12 months ago anyone who wanted a job could have a job, whereas soon, there will be 400,000 [that's 4% of 10 million] who will be out of work. Big difference. Thats a big change in sentiment, in a fully priced property market.

See ya's.

 

[HealthyWealthy]

I was since discussing this with friend who has also made the observation that the method for calculating unemployment is now different to how it has been calculated historically.

Now if someone works 1 hour a week, they are deemed to be employed whereas previously there was some threshold, say 10 hours a week, for determining whether a person was, indeed, 'employed'.

Also, the method of calculating unemployment overlooks the effects of those who are underemployed such as the Holden workers in SA who have negotiated rosters so that have long periods of days off. Clearly, it follows from there that this 'underemployment' has an impact on the economy where people have to cut back and avoid big acquisitions on account of this.

I think the point has been made elsewhere that unemployment figures cannot be read in isolation but also need to be viewed in light of trend and effect on sentiment. Also, I think I understand where Topcropper is going when he expresses frustration at the notion that '8% unemployed should be viewed as 92% working'. If that's the case then the unemployment rate of 10% that occurred in the early 90s shouldn't have been such a big deal, right?

Basic economic principals show us how money supply (which is affected by things like employment) has a strong spiraling effect on the health of the economy. The point is that things often happen at the margins and have a dispproportionate simpact on the macro-picture then it would first appear which is why the current government is hoping that the $900 bonus is going to stimulate the economy back to health. You would have to think that $900 per person is of much smaller financial significance than 8% unemployment but the government is hoping that it be will sufficient to start the spiral upwards regardless.

Accordingly, 8% unemployment needs to be viewed for the the potential knock on effect. Any year 11 economics book would probably be able to explain this better than I have here, although its a fairly simple concept.

 

[topcropper]

None of these groups have a major impact on property prices so if history repeats itself there is not much to worry even if unemployment peaks at 10%.

Well, I'll disagree there.

I speculated that 8% unemployment wouldn't lead to a property slump, but what would I know? It could. Definately count out a boom anyway. But 10% plus, and I'll guess it will be a severe slump.

History shows it will impact. There was 10% unemployment in 83, and nearly 11% unemployment in 92, and both times it lead to a property slump. of course, both periods also co-incided with recession. Recession and unemployment go hand in hand, naturally.

The thing that annoys me with people saying, "Oh, 8% unemployment is still 92% people working" is that it's not the people that hold their jobs that set the prices. Prices of anything are set at the margins. Property prices will be determined by those who lose their jobs and have to sell.

The BHP share price is determined each day by the 1% of shares that are for sale, not the 99% that aren't.



I'd guess, 10% unemployment would be,.......

assuming 4% are unemployable,......
So 6% are out of a job,.....
ten million workforce,......times 6%

Thats 600,000 out of a job and some of them will have to sell, compared to 12 months ago, when every single person who wanted a job could have one and everyone was free to change jobs and find a new one.



When will little Gough run out of money to keep propping up the market? Proping any market up is a disaster waiting to happen.

The resi property market was already widely recognised as far safer than any other asset. Banks will lend way more for resi property than any other asset. History shows how safe and what a good investment it is.

So why is it being propped up? Stupid stuff, by a stupid government.


See ya's.

 

[yorke]

Well, I'll disagree there.

I speculated that 8% unemployment wouldn't lead to a property slump, but what would I know? It could. Definately count out a boom anyway. But 10% plus, and I'll guess it will be a severe slump.

That's alright, if you didn't it would be kind of pointless posting a reply and this forum would end up as boring as other forums were you are not allowed to disagree because you may hurt the OPs feelings or upset him.
We're all speculating and throwing ideas around, and our speculations are as good as the one we get from media "experts". Probably even better since we have first hand real life experience as opposed to just theory.

What I did notice during the previous recession was that school leavers, newly arrived migrants and older workers were the ones who ended up losing their jobs. From memory I think the rate of unemployment amongst them was over 30% but you could probably find the ABS figure for the periods to disprove that. Most in these groups have no mortgage, they are either living at home, renting or already paid off their home. I'm just guessing here but if these groups represent 30% of the entire workforce and 30% of them become unemployed then a 10% unemployment number could possibly have any major impact on property prices. Prices didn't generally drop to much during the 80's and 90's recessions when unemployment rate went over 10% so why would they do so now, specially when we already had some price falls and now a government prepared to prop up prices ?

The thing that annoys me with people saying, "Oh, 8% unemployment is still 92% people working" is that it's not the people that hold their jobs that set the prices. Prices of anything are set at the margins. Property prices will be determined by those who lose their jobs and have to sell.

The BHP share price is determined each day by the 1% of shares that are for sale, not the 99% that aren't.

Actually now I have to disagree with you.
Even if you placed your 100,000 BHP shares on the market at $1 you wouldn't be able to influence the market for too long. With enough buyers you would be taken out and prices return to normal before you could even blink.
Suppose the government came out with grant for new BHP investors who buy this month so now you still have the 1% of the total BHP shares for sale each day but enough buyer interest for 2%. In this case BHP prices will be determined by competing buyers and just how much they are prepared to pay for them. I think the same applies to property, its the buyers who determine property prices.

I'd guess, 10% unemployment would be,.......

assuming 4% are unemployable,......
So 6% are out of a job,.....
ten million workforce,......times 6%

Thats 600,000 out of a job and some of them will have to sell, compared to 12 months ago, when every single person who wanted a job could have one and everyone was free to change jobs and find a new one.

Depending on the % of people with a mortgage, the size of their mortgage, etc some of the 600,000 may have to sell. But then how many out of the 10,000,000 workforce had to sell 12 months ago because of the high interest rates ?

When will little Gough run out of money to keep propping up the market? Proping any market up is a disaster waiting to happen.

...

So why is it being propped up? Stupid stuff, by a stupid government.

I'm just guessing but he's probably trying to alleviate the shortage of affordable rental properties as well as helping the economy along. Probably hopes that over 2-3 years inflation will sort out the problems created.
But in the long run the government stands to gain by not having to provide extra government housing to people on benefits or increase the already ridiculously low rent assistance they pay to renters in private accommodation. Someone on gov. benefits is costing the gov. over $2,500 p.a on rent assistance alone if they go into private rental and even more if they have to provide them with a low cost house. So by giving the FHBs a few extra $$$ to build new houses (then taxes it back in GST ) the government is saving heaps in the long run and creates new jobs which they can also tax. Not so stupid after all.

 

[goodmorningaus]

There is at least 4% of the population refusing to work, we've seen this during the boom when employers had to import unskilled/semi skilled labour to fill vacant positions, so yes the 8% is great news.

I thought the unemployment figures only included people who were unemployed but actively seeking employment. Hence the people who are out of the job market entirely would not be included in the figures.

Obviously unemployment will rise, but I think it's absurd to say because of that we are going to see houses selling for a dollar (or a hundred thousand dollars) like in the US. The US has a whole host of other problems contributing to the mess.

Unless we get into the vicious cycle of a credit crunch (prices go down so banks are afraid to lend so prices go down...) we will only see modest drops or stagnation imo.

I do think that the FHB-range houses are in a bubble though because of the grant. I am just sitting on the sidelines right now, trying to pile up cash so that when it does pop I can start buying....

 

[goodmorningaus]

I'm just guessing but he's probably trying to alleviate the shortage of affordable rental properties as well as helping the economy along. Probably hopes that over 2-3 years inflation will sort out the problems created.

I reckon the government cannot (and will not) allow property to crash. It would wipe out the banks if it did. So they will throw everything they have (and borrow what they don't) to make certain it doesn't fall 40% like some suggest. That's another advantage property has over shares. With corporations the government is not likely to care very much and if they do intervene they take all the equity when they bail it out. It is in the government's best interests to keep property healthy, so the PI has a very powerful ally with similar interests.

I don't know about timing bottoms and tops of markets, but in the long run it seems to be a much more stable investment.

 

[yorke]

I thought the unemployment figures only included people who were unemployed but actively seeking employment. Hence the people who are out of the job market entirely would not be included in the figures.

Nah mate, not sure where you've heard that but its only a rumor started by pollies in Canberra. Pretending to actively seek employment also qualifies you for unemployment benefits.
If you don't believe me try standing at the front of a Centrelink office holding a "workers wanted - no experience necessary" sign and see how many applicants you get . Give the ones who applied your office location and see how many turn up for the interview. If you have a few and are in the enviable position to pick and chose do so and see how many of them turn up to start work. Then from the ones that lasted more then a day see how many you'll ever see again after the first payday. And the less skilled the position the harder it is to find decent workers, I'm guessing the good ones are to valuable to let go.

Obviously unemployment will rise, but I think it's absurd to say because of that we are going to see houses selling for a dollar (or a hundred thousand dollars) like in the US. .

The $1 houses was a good story, mentioning that they were condemned and you'd need to spend many thousands of dollars to fix them up or that the buyer was also up for tens of thousand of dollars in back taxes would have just spoiled it for the viewers...Specially since you could enjoy the same life changing experiences of being beaten up, robbed and carjacked every week at much lower costs just by buying a livable house in the same ghetto.

At least all our $1/week rentals and free giveaway blocks of land were in areas with low population numbers where they need new people to live there as opposed to needing new people to mug. I think I've heard something on Letterman's show about Detroit's murder rate starting to go down, apparently they are now running out of people to kill.

And if you're still tempted by the $1 houses have a read here first,

http://www.topix.com/forum/detroit/TFE4JS1B72531RFET

 

[topcropper]

That post was funny yorke.
And it was all very true.

Kudos.


See ya's.

 

[Aaron Sice]

the mining boom saw shelf stackers on $23k pa suddenly able to become a TA for $65k pa.

these 9500 people refused to take on-the-job training, wanted nothing but the 2+2 or 2+1 FIFO and the cash that came with it.

now, they still have no skills in a downturn and a wasted opportunity to pay off that HSV and plasma and now have to go back and stock shelves - where they should be.

i think it's funny how 25,000 NZ'ers all have "mining" experience, but there are only 2 mines in NZ.

a rise in UE is GOOD at the moment - it's allowing companies to trim dead wood.

bring it on.

 

[goodmorningaus]

Nah mate, not sure where you've heard that but its only a rumor started by pollies in Canberra. Pretending to actively seek employment also qualifies you for unemployment benefits.

Unemployment figures are derived from phone survey samples, not from unemployment benefits #s. So no need for people to lie on an anonymous survey and, even if they due, the numbers would be pretty small.

 

[DadOfSam]

Guys i wouldnt worry too much about unemployment figure releases. They are one of THE most lagging indicators of the economy.

Concentrate your efforts at reviewing forward indicators, these give an indication of where will be in the near future and are MUCH MORE IMPORTANT.

Good point, but do you mean the ANZ Job ads forward indicator?

Anyhoo here's the up-to-March-09 chart for those interested:

Apparently a big driver for the spike in unemployment is a higher "retention rate" i.e. boomers are putting off retirement as their nest eggs take a battering.

Still, as "low" as this unemployment rate is I think the more important thing is the secondary effects the rising joblessness has on consumer sentiment. If workers become more fearful for their own jobs then they're more likely to spend/save more "defensively". Countering that of course are the Rudd cheques and lower interest rates etc. so it'll be interesting to see how Aussies take in all this competing news this year.

EDIT: Sorry for the size of the image! It's much smaller on the source page!

 

[yorke]

Unemployment figures are derived from phone survey samples, not from unemployment benefits #s. So no need for people to lie on an anonymous survey and, even if they due, the numbers would be pretty small.

As far as I know DEEWR is the one that comes up with the unemployment figures derived from the ABS LFS, estimated population and data collected from each state by Centrelink.
The ABS LFS guesstimates are based on a small sample of phone surveys where the some pest will call and asks for a few minutes of your time usually while you are having dinner or watching TV.
It would be hard to put a number of people who lied on purpose or just could not be bothered to pay attention to the questions and just made up numbers to get it over with.
The way that figures are collected is irrelevant, the fact remains that pretending to actively seek employment qualifies you for unemployment benefits. Even if we relied on the LFS alone you would hardly expect a dole bludger to admit that he was to busy enjoying himself to look for work or someone working for cash that he is also collecting the dole.


http://www.ausstats.abs.gov.au/ausstats/meisubs.nsf/0/0CF84FDC7541615FCA2575920015E78B/$File/62020_mar%202009.pdf