Week in review

• Australian unemployment rate falls to 5.1%
• U.S. Fed signals earlier rise in interest rates
• Chinese retail sales up 12.4% m/m

Week ahead

• Australia preliminary retail sales
• Eurozone PMI for services and manufacturing
• U.S. PMI for services and manufacturing

Thought of the week

The drop in the unemployment rate to 5.1% in last week’s labour market report was beyond expectations as 115,000 more people found gainful employment compared to the prior month. Sometimes there are quirks in the data which diminish the headline reading, but not this time. Even with the mixed labour market data recently, employment fell by 31,000 in the prior month, the trend is for a further tightening in the labour market and a lower unemployment rate. However, the pace of employment growth this month may be tough to beat (see chart). This should be music to the ears of the RBA who has focused on job growth to drive wages higher and create sustainable levels of inflation in the economy. The weak relationship between the unemployment rate and wage growth mean that the unemployment rate will likely need to fall further than it would have historically to create the same level of wage growth. The RBA will keep policy easy to achieve this.

Booming employment growth

Employment, change year-over-year, seasonally adjusted  

Source: ABS FactSet J.P. Morgan Asset Management. Data reflect most recently available as of 18/06/21.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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