Retailers are facing a few tough quarters ahead, after the jobs market rebounded with analysts tipping a rate rise with some predicting the possibility of two if the Reserve Bank cannot get inflation under control.
Earlier today the Australian Bureau of Statistic reported that 50,200 people had entered the workforce last month, the market had expected 20,000, despite this the overall unemployment market climbed to 4.1.
Russel Chesler Head of Investments & Capital Markets, at VanEck claims the RBA should “rip the band-aid off” and lift interest rates immediately.
Australia’s share market dipped slightly on the news.
JB Hi Fi shares fell 1.10% Harvey Norman was flat while Kogan was down 0.22%, Woolworths was also down $0.47%.
At this stage, all indicators point to a tight labour market, despite big media industry layoffs.
The increase in employment was not enough to stop the jobless rate rising to 4.1 per cent in June from 4.0 per cent in May.
“It’s a tough pill to swallow, but the reality is that an unemployment figure of at least 4.5 per cent would be needed to cool inflation,” says VanEck management.
The problem for retailers is that they want people to spend while the RBA wants to curtail rising prices and spending in an effort to control inflation claim observers.
Currently analysts are pricing in a one-in-three chance of a move higher by September for interest rate rises.
The RBA expects the pull-back in hiring will cause the jobless rate to gradually drift higher, as new entrants to the workforce struggle to find work.
Treasury expects the jobless rate to hit 4.5 per cent by mid-2025 as the economy slows, according to projections in the May budget.
IFM Investors chief economist Alex Joiner said there was “nothing to stop the RBA from hiking in August if the June quarter CPI warrants it.”
