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Speaker 1: Welcome to Fear and Greed Q and A, where we

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Speaker 1: ask an answer question about business, investing, economics, politics and more.

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Speaker 2: I'm Michael Thompson and every.

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Speaker 1: Monday morning we are joined by economists Stephen Coucoulis to

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Speaker 1: look at the week ahead. You'll find him at the

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Speaker 1: kouk dot com. That's t g ko uk dot com

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Speaker 1: and on X using the handle of the kok Stephen,

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Speaker 1: Good morning.

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Speaker 3: Very good morning, Michael.

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Speaker 1: Now this week really all eyes are on locally, at

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Speaker 1: least the labor force data, the unemployment number that's coming

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Speaker 1: out on Thursday. What are we expecting to see?

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Speaker 3: Yeah, and why that is important is because it's part

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Speaker 3: of the dual mandate of the Reserve Bank. We know,

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Speaker 3: and for decades we've had the Reserve Bank is an

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Speaker 3: inflation targeting central bank, and that's still true. That hasn't

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Speaker 3: gone away. But just to give a little bit of

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Speaker 3: context on why this labor force number on Thursday is

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Speaker 3: so important, is that when the bank was revamped, I

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Speaker 3: suppose by Treasurer Charms, what's that eighteen months ago or so,

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Speaker 3: he and the bank agreed to elevate the importance of

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Speaker 3: full employment as part of the mandate. So that's a

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Speaker 3: long winded way of saying that if the labor market

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Speaker 3: starts moving away from full employment, that is weak job creation,

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Speaker 3: higher unemployment. Even if inflation might be just a smidge

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Speaker 3: above the midpoint of the target, or maybe not quite

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Speaker 3: as low as the rb I would like it, they've

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Speaker 3: got to get equal waiting to the labor force numbers.

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Speaker 3: Which is why this is so important, because we know

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Speaker 3: that over the last three months employment GROW's actually been

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Speaker 3: pretty soft. It's only been an average of eight thousand

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Speaker 3: jobs per month in the last three months, and that's

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Speaker 3: when the population's growing at sort of twenty five thirty

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Speaker 3: thousand a months. So that's why the unemployment rate's gone

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Speaker 3: from four to four point two five ish percent. So

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Speaker 3: we're looking for a slightly better result because we've had

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Speaker 3: the economy looking a little better in household spending and

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Speaker 3: the like the last couple of months, and maybe that

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Speaker 3: will generate a few jobs. But if we don't get

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Speaker 3: that plus twenty five thousand employment and the unemployment rate,

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Speaker 3: if it were to increase to four point four percent,

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Speaker 3: for example, will the dogs be barking about another rate cup.

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Speaker 1: So in terms of the jargon, the language that we

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Speaker 1: use here when we refer to full employment, what's that

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Speaker 1: relate to, Oh, Michael, I'll just switch my microphone off,

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Speaker 1: I'll step for a few minutes and I'll come back.

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Speaker 3: In colloquial terms, is when everybody who wants a job

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Speaker 3: can get a job.

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Speaker 2: Gotcha?

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Speaker 3: And that actually, and that's not meant to be any

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Speaker 3: a derogatory towards doll ludges and surfers and these sort

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Speaker 3: of things, because a lot of people are unemployed because

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Speaker 3: I've just resigned from my job. I'm having a month

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Speaker 3: off before I start my new job. So in the survey,

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Speaker 3: you're unemployed. So I think that's called frictional unemployment. So

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Speaker 3: it's not saying full employments when unemployments zero, But it's

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Speaker 3: when anyone who wants a job can have a job,

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Speaker 3: and it's best measured, not necessarily through the unemployment rate.

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Speaker 3: This is the curious thing about full employment. It's measured

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Speaker 3: th wages. Because if we have full employment and over

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Speaker 3: full employment labor shortages, in other words, then workers can

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Speaker 3: put up their hands and say, well, I'm only going

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Speaker 3: to work for you if you give me your pay rise.

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Speaker 3: Otherwise I'm going to be sitting aside so it's a

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Speaker 3: combination of what the unemployment rate is plus wages and

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Speaker 3: just as we're saying that the unemployment rate has crept

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Speaker 3: up a bit in the last few months, and not coincidentally,

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Speaker 3: wages growth is well contained. So it's a moving feace.

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Speaker 3: There's no one single number that the Reserve background ayonss

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Speaker 3: can really put on it with a degree of confidence.

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Speaker 3: We sort of know when wages growth is decelerating and

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Speaker 3: unemployment is increasing that you're all moving away from full employment.

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Speaker 1: Okay, And so we obviously know what it looks like

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Speaker 1: when unemployment is too high. Is it possible for it

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Speaker 1: to be too low then as well?

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Speaker 3: The short answer is yes. That might sound like a

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Speaker 3: very harsh thing to say when even when we've got

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Speaker 3: full employment, and I will just contrack to what I

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Speaker 3: said a moment ago, but if you had an unplate

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Speaker 3: of three percent, that would be definitely too low, because

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Speaker 3: what that means is that there's a shortage of workers.

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Speaker 3: And we experienced this immediately after the pandemic and we

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Speaker 3: opened up everything again, there was a skill shortage. But

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Speaker 3: businesses saying oh right, I'm ready to invest, I'm ready

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Speaker 3: to expand, I need more workers no one's applying for

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Speaker 3: my job vacancy, and so business was actually postponed or deferred,

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Speaker 3: and of course that's bad for economic growth. You know,

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Speaker 3: we want firms with good ideas and fabulous ideas to

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Speaker 3: get the people with the skills and talent that they

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Speaker 3: need to expand business. So you can have an economy

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Speaker 3: that's got an unemployment rate that's too low, but that

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Speaker 3: shows up in a wage boom. And dare I say it,

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Speaker 3: not that we've seen that for decades in Australia, but

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Speaker 3: they've good old fashioned wage price spiral where firms put

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Speaker 3: up their wages to attract the talent, and the way

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Speaker 3: they recoup that high that labor cost as part of

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Speaker 3: it is put up to cover their costs, so you

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Speaker 3: get wages going oh, then you get inflation going up.

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Speaker 3: We're not there just to reassure everyone, but that is

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Speaker 3: sort of like at the background of what is full employment.

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Speaker 1: I love these chats because it just gives me an

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Speaker 1: opportunity to ask you everything that I've ever wondered about

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Speaker 1: these about these themes, what about under employment?

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Speaker 2: And so when we have so technically.

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Speaker 1: You might be you might be employed, so you are

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Speaker 1: not counted as unemployed, but you do not have enough work,

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Speaker 1: you do not have as much work as you want,

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Speaker 1: and so you are technically underemployed.

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Speaker 3: Is that right? Yes, great question, and the Bureau of

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Speaker 3: Statistics actually do have a number for that. It's about

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Speaker 3: six percent at the moment of the workforce are underemployed.

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Speaker 3: So the question is do you have a job, and yes,

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Speaker 3: so your count it as employed. Then the next question

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Speaker 3: the Bureau of Stats ask when they're surveying the labor

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Speaker 3: for statement is do you want to work more hours?

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Speaker 3: So that can be people who might have a casual job,

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Speaker 3: a part time they might be only doing ten hours

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Speaker 3: a week, which is they really want twenty to cover

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Speaker 3: the bills. So there's this underemployment component that is definitely

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Speaker 3: definitely there, And as I said, that's about six percent,

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Speaker 3: so it's actually higher than the unemployment rate by quite

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Speaker 3: a margin at the moment. So that's also an indicator

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Speaker 3: of slacking the economy because if your business picks up

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Speaker 3: and you're only you've got five casual workers and are

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Speaker 3: only doing fifteen hours a week, well off of them

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Speaker 3: twenty hours a week. So employment doesn't change, but the

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Speaker 3: hours worked increases. So that's why the labor force numbers.

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Speaker 3: The concepts of full employment nahru do I mention its

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Speaker 3: name are so complex and difficult to work out with

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Speaker 3: a hard sort of number put on it, but their

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Speaker 3: concepts that are still nonetheless really important. And we do

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Speaker 3: as economists, the Reserve Bank and Treasury whatever, mull over

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Speaker 3: these things because to get it wrong, and get it

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Speaker 3: wrong badly can lead to a large number of people

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Speaker 3: being unemployed. And that's you're just a alluding to, is

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Speaker 3: not a good thing. We don't want people to be unemployed.

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Speaker 3: It's bad for them socially, it's bad for the economy.

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Speaker 3: With my economists cap on, So yeah, we want to

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Speaker 3: keep near full employment now.

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Speaker 1: So that's all eyes on Thursday to see what happens

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Speaker 1: with those numbers. The other big event happening this week,

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Speaker 1: we've got to look overseas for this one. The US

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Speaker 1: Federal Reserve is meeting, yes, which is Tuesday, Wednesday US time,

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Speaker 1: so effectively kind of Wednesday Thursday almost for US. And

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Speaker 1: there has been a great deal of talk and a

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Speaker 1: lot of expectation that the Fed will cut rates.

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Speaker 2: Is it going to happen?

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Speaker 3: It looks like it and this is. It's largely I'll

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Speaker 3: say largely on fundamental grounds. Yeah, we had our discussion

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Speaker 3: about our labor force state here in Australia, but we've

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Speaker 3: known from the US labor force lubs, including some very

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Speaker 3: big revisions to history. Every year, the Bureau of Labor

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Speaker 3: Statistics in the US to a benchmarking of their numbers.

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Speaker 3: I won't go into that, but they actually lost about

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Speaker 3: nine hundred thousand jobs in their re defining of what

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Speaker 3: employment is in the US. And that's okay an economy

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Speaker 3: of three hundred and thirty million people. But nonetheless, we

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Speaker 3: know the labor markets week and the unemployment rate in

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Speaker 3: the US has gone up. Employment growth is very weak,

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Speaker 3: so not dissimilar to here. And the FED has paused

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Speaker 3: for the last what is it, six or eight months.

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Speaker 3: They haven't moved rates lower because they've been worried about tariffs,

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Speaker 3: they've been worried about inflation just lingering a little bit

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Speaker 3: higher than they would like to see it. But that

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Speaker 3: labor market number, I'm not going to mention pressure from

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Speaker 3: Donald Trump on the FED.

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Speaker 2: But there is a political element to it.

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Speaker 3: There is a look what at this is there will

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Speaker 3: be a cut. They probably only go twenty five, so

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Speaker 3: mister Trump will probably really crossed that they haven't got

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Speaker 3: the Fed Fund rate lower. So probably a twenty five

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Speaker 3: point cut, and as we say, a duvish cut, because

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Speaker 3: when we look at the futures market right now, they've

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Speaker 3: got from today about another of what is it about

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Speaker 3: another four rate cuts priced in over the next six

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Speaker 3: to twelve months, So we'll get twenty five this week

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Speaker 3: and probably another seventy five after that over the course

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Speaker 3: of the next nnch twelve months.

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Speaker 1: All right, so we've got one big thing happening here,

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Speaker 1: one big thing happening overseas. Makes for a very exciting week.

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Speaker 1: Enjoy it, Stephen, Thank you, Michael. That was economist Stephen

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Speaker 1: Coo Coolest, better known as the Kook. You can find

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Speaker 1: him at the kook dot com and follow him on

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Speaker 1: x using the handle of the Kook.

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Speaker 2: I'm Michael Thompson and missus Bear and Greg Q and

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Speaker 2: a