Employment data highlights weakness in mining industry

Australia: 

Employment by industry data was released yesterday by the ABS. 

In the three months to November, most jobs were created in retail (67.5k), professional, scientific & technical services (41.3k), financial & insurance services (38.9k) and accommodation (36.4k), plus a total of 115k jobs were created in a wide variety of other industries. 

This more than offset job losses in mining (-25.4k), education & training (-15.0k) and manufacturing (-13.4k).  

Importantly, this breakdown would suggest that the recent strength in the labour market is broad-based, and job losses brought about by the downturn in mining investment is being more than offset by job gains in other industries.

Australian population growth was steady at an annual pace of 1.4% in the June quarter, down from a recent peak of 1.8% in the March quarter 2013. 

By State, the strongest growth was in Victoria (1.7%), followed by NSW (1.4%). Population growth has slowed significantly in resource States WA and Queensland. Population growth also slowed in South Australia to 0.8%.

Share Markets:

Financial markets continued to react to the outcome of the Federal Reserve meeting Thursday morning.

European shares strengthened following the strong US session in the previous day. However, US stocks reversed the initial positive reaction to the Fed's rate hike decision.

Another fall in the oil price may have also weighed on shares while economic data overnight was mixed.

Interest Rates:

US bond yields rose with US 10-year yields falling 7 basis points to 2.23%. Yields are lower than just before the US Federal Reserve decision.

This could suggest ongoing scepticism the Fed will tighten policy significantly further or concerns about the outlook for global growth.

There was less movement in Australian bond futures. Yields based on 3-year bond futures were unchanged at 2.13%, while 10-year yields fell 3 basis points to 2.89%.

Foreign Exchange:

The US dollar index rose, moving ahead on the prospect of further Federal Reserve rate hikes, seemingly a bit disconnected with the reaction in interest rate markets.

The Australian dollar came under pressure on the back of US dollar strength and the pull-back in risk appetite and is now trading at around 71.3 US cents this morning.

Commodities:

Commodity prices remained under pressure. Oil prices fell on a lift in US crude stocks, while the price of gold and copper were lower. The stronger US dollar weighed on commodity prices.

Europe: 

The German IFO business climate index fell to 108.7 in December from 109.0 in November. However, the expectations index was steady at 104.7 and suggests firms remain relatively upbeat regarding the outlook.

New Zealand:

The New Zealand economy grew 0.9% in the September quarter, for annual growth of 2.3%.

Quarterly growth was a touch above consensus estimates of 0.8%, although annual growth was in line with consensus forecasts.

Economic activity was driven by services and manufacturing industries in the quarter. It indicates a pickup in activity after a loss of momentum in the first half of the year.

Annual growth is well down from a peak of 3.5% in the December quarter 2014. This more moderate pace of economic growth is likely over the medium term largely reflecting lower diary prices, although prices have stabilised recently.  

United Kingdom:

Retail sales jumped 1.7% in November, more than reversing a 0.5% decline in October. The gain well exceeded consensus estimates of a 0.6% increase. Sales were boosted by Black Friday discounting.

United States:

The Philadelphia Fed index declined from 1.9 in November to -5.9 in December, the weakest in almost three years. It adds to the range of indicators suggesting that manufacturing activity is slowing.

Initial jobless claims fell 11k to 271k in the week ending 12 December.

The four-week moving average edge down to 270.5k, confirming that the labour market remain on track for further improvement.

The leading index rose 0.4% in November, above market expectations for a 0.1% rise.



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