The Week Ahead | 16 Sep 2024

Published Sep 15, 2024, 6:30 PM

This is Fear and Greed - The Week Ahead, where Sean Aylmer and Stephen Koukoulas discuss the major events, reports and releases that provide insight into the economy this week (with a look back at the events of last week too).

Welcome to Fair and Greed the week Ahead. I'm sure, ailma, and I'm delighted to say I'm joined this morning after a couple of weeks break by economist Stephen Cocoulis. You'll find him at the cook dot com and on exit using the handle to cook Stephen, How.

Was Europe fantastic? Highly recommended? It was just Italy. I don't mean justicly, it was Italy, but what an absolutely fabulous place to visit. You know, the Aussie doll was doing okay against the euro so the cost pressions were not too bad. Absolute highlight. St. Mark's Square in Venice flooded when we were there, so it was sort of shin deep in water, sort of fearing how high the water. Yeah, so I've been in Smuck Square when it flooded. So that was That was one of the many, many, many highlights.

Have you kept a cross what's been going on locally though, Stephen most important in the economy?

Oh, I certainly have. And as was the nature of our trip away, he was actually having a bit of an afternoon rest and so I don't sleep in the afternoon rest. Sign Listen to podcasts including Fear and Greed just to keep up to date with what's happening the data flows. Yep, so I'm up to speed, and I've been back for a few days now, so well and truly back in the groove. Longing of the time that I was having a lovely cup of coffee in some Mark Square.

Fantastic one thing I've noticed. It means I was away for a while while year away, and over the past two or three weeks, it just seems that the conversation definitely in the US a little bit so in Australia, with Sarah Hunter, the chief economists from Reserve Bank speaking last week, it's just shifting a little bit from inflation to the labor market. The conversation it.

Is certainly from the FED, and of course the FED meets later this week. They're going to be cutting into straits is a very high probability that will be twenty five basis points, not fifty. But the FED officials over the last well week or two or three have been saying that yes, we've we've got inflation almost where we want it, confident that it will get there. But it's the unemployment rate. So the US has had that unemployment rate sort of edging up over the last twelve months, the rate of job growth starting to track a little bit lower, not catastrophically so, but it's a similar story here in Australia too, where you know our labor force numbers which are out later this week as well, which will touch on later, are also showing signs of softness and maybe, just maybe that'll feed into the RBA changing its view and the not too distant future about whether a rate cut is needed here.

So there is a Chief economists Sarah Hunter last week was talking about this concept of full employment, which is very difficult to pin down, but the idea, Steve, just explain it. When you have full employment, that's a good thing, isn't it. But you don't want too much full employment.

Like good red wine, there's an optimalm out. If you have too much of a good thing, you still get to hang over the next day. So full employment, as you quite rightly touched on and Sarah touched on in her terrific speech I recommend people read it was that when everybody who wants a job can find job relatively easily, that is full employment. And the way that it's generally calculated is with two indicators. One is the unemployment rate, So is there a level that the unemployment rate can fall to without there being inflation pressures? And that's where the second element comes in, which is wages, because if you have a what do we call it over full employment, So if the economy is absolutely humming along and roaring along, then of course businesses have to pay up more for the scarce labor because the unemployment rates so low, causing wages to increase and you get that wage price spiral. Now we haven't seen that in Australia at this stage, and in fact, if anything, the wages growth are starting to sort of taper off a little bit in line with the slowing economy. But ideally if you want full employment, yes, it's a very very difficult thing to pinpoint. You only know really a year after the event whether you got there or not. But in the meantime, you know, the RBA charter is to grow the economy meet the inflation target, of course, but also to maintain economyent full employment. That's the sort of challenge that the markets are now mulling over as we consider what happens to THEBA interest rates over the next well the next six twelve eighteen.

Months and in a couple of days time we get the labor force figures from the Bureau Statistics, which will help us work out whether at full employment or not maybe a wait, but at least it'll give us a number.

Another snapshot. So again, this is this is a fascinating thing, and you know, I've been around long enough. I've got to change my thinking on some of these things too. But the population growth in Australia means that we have to have employment of a round about plus thirty five thousand per month for the unemployment rate to remain stable. That is the growth rate, if you like, of the population and the labor force. So if we get anything less than that, say we just got a plus ten thousand, that's not strong enough and the unemployment rate would creep up. So that's a roundabout way of saying that after the last couple of months of relatively what appeared to be solid employment growth, the market's looking for a bit of a pullback and a round about plus twenty five to twenty thousand in employment growth. Unemployment rate, which is four point two is expected to be steady at four point two. But as we know, with these labor force surveys from the Bureau of Statistics. There can be these little quirks that get thrown up every now and then. If there's any increase in the unemployment rate or any downside surprise to employment, then that rate high speculation that will be fueled by the Fed rate cup later this week will be sort of a bit more intense.

It's going to be interesting. Stephen, thank you for joining me this morning.

Thanks Jean.

There is economist Stephen corcul Us, better known as the Kok. You can find him at the cook dot com and follow him on exit using the handle of the Kirk.

That's t g k UK the Cook.

I'm sure aim, and this is fear and greed. The week ahead.