Labour Force Figures

Labour force figures released yesterday provide an unambiguous indication of an economy in downturn. The key figure to watch is the number employed and full-time positions dropped by 53,800 - the largest monthly drop since 1991 when 79,400 positions were lost and the economy was in official recession. Part-time positions increased by 55,600 reflecting the need for people to get work wherever they can find it and women returning to the workforce possibly due to their partners loosing their job. Household income will undoubtedly be impacted which will lead to lower spending and in-turn further reductions in employment.

The steepness of the downward momentum means that fiscal and monetary stimulus must be more aggressive than is notionally required. For this reason I don't think the RBA easing cycle has finished. The market is pricing in 50 points in April. The RBA may want to wait and see how the new fiscal stimulus impacts on the economy but the stakes are too high and I think erring on the side of caution and going too far in this environment rather than not enough should be the way to go..