Job figures look good, but may not be as seems

SO FAR, so good. After six weeks of nothing but bad news from financial markets, and business and consumer surveys, the strong jobs growth in May comes as welcome relief.

On the trend measure, full-time jobs are returning at the rate of 20,000 to 25,000 a month. At last, they are now back to the levels of August 2008, before the financial panic.

Unemployment has shrunk back to 5.25 per cent. Working hours are rising. The recovery has spread from the leaders, Victoria and Western Australia, to the laggers, Queensland and New South Wales.

But there's a catch. The Bureau of Statistics estimates that in the past year the adult population has grown by almost 430,000, yet growth in the labour force has been barely half that. That suggests a lot of hidden unemployment, not counted in these figures.

The key question is what to make of this. Does it show, as some argue, that Australia's economic recovery is now too resilient to be shoved off course by the tremors in the global economy? Or is it rather that the bad news of May and June didn't hit in time to show up in these figures?

It's probably a bit of both. Australia's economy clearly has momentum going, and business and consumer confidence is still marginally positive. If there's not another surprise twist from Europe or China we're likely to take the panic of May in our stride.

But these figures don't settle the issue.

The jobs data is a lagging indicator: they tell us what was behind us, not what's ahead. This survey was taken in early May, so it really measures jobs growth in April, before the market plunge began.

The sharp fall in business confidence and conditions since April probably means we'll see slower job growth ahead, at least until the markets settle. And that will probably go with slower economic growth.

The markets last night were still punting that the next interest rate rise is at least a year away.