NAB: Employment Stronger Than It Looks In January

NAB note that “January employment was much stronger than the headline, and we caution not to read too much into the softness implied by today’s figures. A larger number of people than usual were ‘waiting to start work’ and so not yet counted as employed.”

• “On our analysis, if that cohort was instead the same size as January 2020 and the rest were employed, employment would have been +61K, instead of the -11.5K published. The unemployment rate would have been 3.6% instead of the 3.7% published; 3.5% previously. As a result, we think February data should bounce strongly, and we note the ‘waiting to start work’ category gave a good guide to the strong recovery out of the Delta lockdowns in 2021 and from Omicron and similar seasonal impacts back in January 2022.”
• “In short, we need to wait for February data for a clear read. NAB continues to expect the RBA to raise rates by 25bp at each of the next three meetings for a cash rate peak of 4.1% by May 2023. Thereafter we think the RBA will need to go on an extended pause as it assesses the impact of the considerable tightening put into place.”