Michael Gordon: Westpac Senior Economist ahead of today's employment data release

A warning of more tough times and job losses ahead. 

Latest data due out this morning is expected to show the unemployment rate has reached 4.7%, up from 4.3% in the previous quarter. 

A higher unemployment rate will give the Reserve Bank more confidence to cut the Official Cash Rate. 

But Westpac senior economist Michael Gordon told Mike Hosking what is certain is more people will be finding themselves out of work sooner or later. 

He says whatever today's number is, unemployment is likely to peak at 5.5% in the current cycle. 

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Episode Transcript

Speaker 1 (00:00):
So jobs Day today, of course another important part of
the economic story that will help inform the Reserve Bank
as to whether the misery that they've engineered it has
done its jobs so they can start to cut the
cash rate. Senior economists at Westpac Michael Gordon back with us. Michael,
morning to you. Good morning, your numbers.

Speaker 2 (00:14):
What we're expecting four point seven for today's survey. That's
coming from four point three percent unemployment great last time.

Speaker 1 (00:21):
And if it's more than four point seven, do we
panic then think we're heading to recession and the market
goes into free fall or not.

Speaker 2 (00:29):
Probably not that dramatic from just one number, but I mean,
certainly I think we are heading towards probably more like
five and a half at some point by the middle
of the year. So how today's number comes out probably
doesn't really change that overall picture, which is a.

Speaker 1 (00:43):
Very important point you make. So as miserable as we
are about four point six or four point seven, it's
still got a long way to go, hasn't it. In theory?

Speaker 2 (00:52):
Yeah, I mean, the labor market tends to be one
of the last shoes to drop in any economic cycle.
This is really the product of it's almost two years
now of economy. It's kind of in a slow leak
and I had a pretty mild impact on unemployment at first,
but it's really been picking up the pace more in
the last few quarters.

Speaker 1 (01:08):
You've changed, I mean, I think it was you guys
who came with Q two and Q three. You're seeing
some real trouble for the economy. How does the Reserve
Bank interpret all that we're seeing in this ongoing battle
between the it's bad enough help us versus not not
quite bad enough yet?

Speaker 2 (01:26):
Well, I think it'll feed into their forecast when they
come out next week, and I mean it should ultimately
mean less inflation pression than they were worrying about. I mean,
it's really the kind of the homegrown inflation stuff that's
been worrying them lately. So unfortunately that does mean that so,
you know, having some weakness in the economy and kind
of taking that pricing power out is really a key

(01:47):
part of the formula that they need to see.

Speaker 1 (01:49):
No one's cutting yet, obviously the Fed's got the big
headline so far this week. Yesterday we had Australia not
only aren't they cutting, but it's going to be a
long time before they do. And they've still got hikes
on the table. How out of sinc are we or
are they all individual stories?

Speaker 2 (02:03):
I think everyone's sort of running at their own pace
at the moment. So there's been a couple I think
Canada has cut a couple of times, the UK's reluctantly
cut once. They're all kind of in different positions in
terms of how close inflation is to those targets that
they need to see. We are, unfortunately still at towards

(02:23):
the higher end of that range. So we haven't had
nearly as much success as the likes of Canada as
for instance, has done.

Speaker 1 (02:30):
So has anything materially changed in your view? Recut So
we're still you're still thinking towards the end of the year.

Speaker 2 (02:38):
So we have cuts starting from the October meeting and
then another one in November. So that's the that's the
last opportunity of the year. We have been bringing that
timing forward just to reflect the way that the data
has been turning out. And I think certainly if you're
kind of looking at the highest frequency stuff like we do,
there was probably sort of a turn towards the worst

(03:00):
has come more recently to like some of these June numbers.
It's not really that easy to to sort of figure
out what, you know, what is driving that first, because
it's been quite sudden and it can just be noised.
But yeah, certainly, just we've kind of noticed more recently
things have taken a bit of a turn for the worse.

Speaker 1 (03:16):
Would you expect Adrian to note that next week if
what he sees is what you see, because he's not
cutting till next year apparently officially.

Speaker 2 (03:25):
Well, I think in their last statement last month, without
putting any numbers around it, there's certainly indicative in words
that they'd come off that view. You know, then they'll
be having their discussions at the moment and running through
some of that recent data, So I don't think they're
really going to be too far from what we're thinking
at the moment.

Speaker 1 (03:43):
Good stuff, Michael, appreciate your expertise as always, Michael Gordon,
Westpac SENI your Economists. For more from the Mic Asking Breakfast,
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