1 00:00:05,460 --> 00:00:07,680 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. I'm Sean 2 00:00:07,680 --> 00:00:11,429 Sean Aylmer: Aylmer, and as always, I'm joined by economist Stephen Koukoulas. 3 00:00:11,429 --> 00:00:13,950 Sean Aylmer: You'll find him at thekouk. com and on X using 4 00:00:13,950 --> 00:00:16,080 Sean Aylmer: the handle, TheKouk. Stephen, good morning. 5 00:00:16,619 --> 00:00:18,720 Stephen Koukoulas: Good morning, Sean. What a week last week, hey? 6 00:00:19,020 --> 00:00:22,470 Sean Aylmer: Yeah, I hope you're well rested over the weekend because 7 00:00:22,470 --> 00:00:25,200 Sean Aylmer: so much happening in the world of economics last week. 8 00:00:25,200 --> 00:00:27,959 Sean Aylmer: Where do we start? Maybe we start with Central banks, 9 00:00:27,960 --> 00:00:29,250 Sean Aylmer: the Reserve Bank and the Fed. 10 00:00:29,670 --> 00:00:32,609 Stephen Koukoulas: And the Bank of Japan hiking rates. Look, there was 11 00:00:32,610 --> 00:00:35,549 Stephen Koukoulas: so much happening last week. The BOJ, Bank of Japan, 12 00:00:35,820 --> 00:00:38,070 Stephen Koukoulas: hike rates for the first time in 17 years. So 13 00:00:38,070 --> 00:00:43,350 Stephen Koukoulas: from minus 0. 1% to plus 0. 1. Widely anticipated, but 14 00:00:43,350 --> 00:00:45,420 Stephen Koukoulas: they're the sort of exception rather than the rule and 15 00:00:45,420 --> 00:00:47,820 Stephen Koukoulas: we know that the Japanese economy is so, so different to 16 00:00:47,820 --> 00:00:51,900 Stephen Koukoulas: the rest of the world, the Western world. And the other central banks 17 00:00:51,900 --> 00:00:55,080 Stephen Koukoulas: that matter most arguably for us, the Reserve Bank of 18 00:00:55,080 --> 00:00:59,040 Stephen Koukoulas: Australia on hold. A change of wording from the governor 19 00:00:59,040 --> 00:01:02,280 Stephen Koukoulas: Michelle Bullock at her press conference, which was again a 9. 20 00:01:02,670 --> 00:01:08,130 Stephen Koukoulas: 8 out of 10 effort. Hard from 10 out of 10. But she was talking that they're 21 00:01:08,130 --> 00:01:10,559 Stephen Koukoulas: not going to rule anything in or anything out when 22 00:01:10,559 --> 00:01:13,259 Stephen Koukoulas: it comes to the outlook for interest rates. They did 23 00:01:13,260 --> 00:01:16,500 Stephen Koukoulas: drop the bias towards tightening that the next move in 24 00:01:16,500 --> 00:01:18,539 Stephen Koukoulas: rates is probably up. They've got rid of that. So 25 00:01:18,540 --> 00:01:23,340 Stephen Koukoulas: they're acknowledging the slowing economy, the fact that inflation's low. 26 00:01:23,340 --> 00:01:26,459 Stephen Koukoulas: It was interesting, the opening sentence in the statement, the 27 00:01:26,459 --> 00:01:30,269 Stephen Koukoulas: published statement, was referring to the monthly inflation momentum, which 28 00:01:30,270 --> 00:01:34,290 Stephen Koukoulas: was down to 3. 4%. So that was important. The Fed, 29 00:01:34,350 --> 00:01:39,990 Stephen Koukoulas: well, that was sort of neutral. Powell, the chairperson of 30 00:01:39,990 --> 00:01:42,779 Stephen Koukoulas: the Federal Reserve was sort of saying, " Yeah, we're probably 31 00:01:42,780 --> 00:01:44,969 Stephen Koukoulas: going to cut, but not yet. We want to be sure 32 00:01:44,969 --> 00:01:47,580 Stephen Koukoulas: that the lip up in inflation in January and February 33 00:01:47,580 --> 00:01:49,920 Stephen Koukoulas: is not a change of trend. We want to be 34 00:01:49,920 --> 00:01:52,860 Stephen Koukoulas: sure that inflation is back on track, but we're still 35 00:01:52,860 --> 00:01:56,010 Stephen Koukoulas: probably going to cut rates." So yeah, something for everybody 36 00:01:56,010 --> 00:01:57,539 Stephen Koukoulas: last week with the central banks. 37 00:01:58,080 --> 00:02:01,620 Sean Aylmer: Okay. What about those labor force figures and unemployment rate 38 00:02:01,620 --> 00:02:03,900 Sean Aylmer: of 3. 7%? Bit of a shock. 39 00:02:04,260 --> 00:02:06,750 Stephen Koukoulas: It's more of a shock than a hundred to one 40 00:02:07,800 --> 00:02:10,320 Stephen Koukoulas: winner of the Melbourne Cup. It doesn't happen very often, 41 00:02:10,620 --> 00:02:14,790 Stephen Koukoulas: we had one recently. So again, we had, gosh, 116,000 42 00:02:14,790 --> 00:02:17,130 Stephen Koukoulas: increase in employment. I think the top of the market 43 00:02:17,130 --> 00:02:20,730 Stephen Koukoulas: consensus was about plus 45. So wow, out of the... 44 00:02:20,790 --> 00:02:23,219 Stephen Koukoulas: Blew that one out of the water. And 3. 7 45 00:02:23,219 --> 00:02:27,750 Stephen Koukoulas: unemployment from 4. 1. Again, way outside anyone's expectations and 46 00:02:29,490 --> 00:02:33,510 Stephen Koukoulas: the analysis that tended to follow that was, and acknowledged 47 00:02:33,510 --> 00:02:35,639 Stephen Koukoulas: by the Bureau of Statistics themselves. They've had a lot 48 00:02:35,639 --> 00:02:40,560 Stephen Koukoulas: of trouble seasonally adjusting the November, December, January, February numbers 49 00:02:40,799 --> 00:02:43,500 Stephen Koukoulas: because of changes in spending. We go back to those 50 00:02:43,860 --> 00:02:46,590 Stephen Koukoulas: Black Friday retail sales. There's a lot of temporary employment 51 00:02:46,590 --> 00:02:50,760 Stephen Koukoulas: there. We change our holiday patterns around December, January. We 52 00:02:50,760 --> 00:02:55,709 Stephen Koukoulas: had Taylor Swift in February. Look, I don't know, but 53 00:02:55,710 --> 00:02:58,169 Stephen Koukoulas: this is a classic case where you want to see 54 00:02:58,169 --> 00:03:01,290 Stephen Koukoulas: more numbers. That it's always nice to see a lift 55 00:03:01,290 --> 00:03:05,280 Stephen Koukoulas: in jobs and lower unemployment. So that certainly, probably, pushes 56 00:03:05,280 --> 00:03:08,550 Stephen Koukoulas: back the chatter about when the next rate cut or 57 00:03:08,730 --> 00:03:11,429 Stephen Koukoulas: if the rate cut's going to happen at all. But 58 00:03:11,550 --> 00:03:13,469 Stephen Koukoulas: yeah, it was a real shock of a number. 59 00:03:14,280 --> 00:03:18,930 Sean Aylmer: Okay, so bringing all that together, inflation, as always, is 60 00:03:18,930 --> 00:03:21,389 Sean Aylmer: center stage. And this coming week we've got the monthly 61 00:03:21,389 --> 00:03:24,120 Sean Aylmer: inflation figure. And you just nominated the fact that the 62 00:03:24,120 --> 00:03:26,280 Sean Aylmer: Reserve Bank talked about the monthly inflation last week. 63 00:03:26,340 --> 00:03:28,410 Stephen Koukoulas: They did, and that's what makes this one really important. 64 00:03:28,410 --> 00:03:31,320 Stephen Koukoulas: Now, we've gone from a peak of 8. 4% at the 65 00:03:31,320 --> 00:03:36,449 Stephen Koukoulas: end of 2022 to 3.4%. It's the most recent observation. Look, there's a few 66 00:03:36,450 --> 00:03:38,220 Stephen Koukoulas: reasons to think this one's going to tick up a 67 00:03:38,220 --> 00:03:40,680 Stephen Koukoulas: little bit. There's a low number dropping out of the 68 00:03:40,680 --> 00:03:44,369 Stephen Koukoulas: run rate. So with petrol prices also increasing and a 69 00:03:44,370 --> 00:03:48,120 Stephen Koukoulas: number of services prices included in this February number which 70 00:03:48,120 --> 00:03:50,670 Stephen Koukoulas: comes out, I think the general consensus, we're going to 71 00:03:50,670 --> 00:03:53,820 Stephen Koukoulas: tick back up towards about 3. 6, 3. 7. So 72 00:03:53,820 --> 00:03:56,730 Stephen Koukoulas: the trend is still low, even though the monthly zigzag 73 00:03:56,730 --> 00:04:00,630 Stephen Koukoulas: pattern's going to continue, obviously, any surprises, and goodness, the 74 00:04:00,750 --> 00:04:04,020 Stephen Koukoulas: ABS has thrown up a few. Any surprises, either higher 75 00:04:04,020 --> 00:04:07,500 Stephen Koukoulas: or lower, will again just change that sentiment or drive 76 00:04:07,500 --> 00:04:10,319 Stephen Koukoulas: that sentiment towards rates on hold or rate cut. And 77 00:04:10,379 --> 00:04:12,690 Stephen Koukoulas: the outsider of the field at the moment is that 78 00:04:12,959 --> 00:04:15,000 Stephen Koukoulas: next move in rates is up, but all eyes on 79 00:04:15,000 --> 00:04:17,400 Stephen Koukoulas: that inflation rate, it does matter. And I'm so pleased 80 00:04:17,400 --> 00:04:18,750 Stephen Koukoulas: we've got monthly inflation now. 81 00:04:19,680 --> 00:04:21,990 Sean Aylmer: What about the job vacancy figures out this week? Given 82 00:04:22,020 --> 00:04:25,049 Sean Aylmer: those unemployment figures last week, we kind of start looking 83 00:04:25,049 --> 00:04:27,268 Sean Aylmer: at job vacancies and anything that can give us a 84 00:04:27,270 --> 00:04:30,149 Sean Aylmer: forward indicator of the employment market a little bit more closely. 85 00:04:30,420 --> 00:04:32,970 Stephen Koukoulas: Oh yes, forward indicator. And this is why so many 86 00:04:32,970 --> 00:04:35,400 Stephen Koukoulas: of us, I'll put my hand up, front and center, 87 00:04:35,610 --> 00:04:38,160 Stephen Koukoulas: were wrong with that official labor force numbers last week, 88 00:04:38,160 --> 00:04:42,779 Stephen Koukoulas: because job vacancies, the SEEK and Indeed job ads, have 89 00:04:42,779 --> 00:04:45,839 Stephen Koukoulas: all been trending down over the last 12 to 18 months or 90 00:04:45,839 --> 00:04:49,140 Stephen Koukoulas: so. And that sort of normally, fits with a trend 91 00:04:49,140 --> 00:04:51,839 Stephen Koukoulas: increase in the unemployment rate. Now, as I said, we 92 00:04:51,839 --> 00:04:54,060 Stephen Koukoulas: want to get one more monthly unemployment number to see 93 00:04:54,060 --> 00:04:56,669 Stephen Koukoulas: whether that was a quirk or not. But these job 94 00:04:56,670 --> 00:05:01,229 Stephen Koukoulas: vacancies numbers later this week will actually show the demand 95 00:05:01,230 --> 00:05:05,879 Stephen Koukoulas: for labor from the private sector in particular, and just validate or 96 00:05:05,879 --> 00:05:09,089 Stephen Koukoulas: otherwise whether the labor market's slowing or not, because these 97 00:05:09,089 --> 00:05:11,850 Stephen Koukoulas: are a pretty comprehensive set of demand for labor or 98 00:05:11,850 --> 00:05:14,580 Stephen Koukoulas: future demand for labor, and they have been trending down. 99 00:05:14,580 --> 00:05:17,190 Stephen Koukoulas: So the market's still actually looking for a small fall 100 00:05:17,190 --> 00:05:20,849 Stephen Koukoulas: of about 1 to 2% quarter on quarter, just confirming 101 00:05:20,849 --> 00:05:24,150 Stephen Koukoulas: that down trend, which says that the labor market's probably 102 00:05:24,150 --> 00:05:26,789 Stephen Koukoulas: weaker than last week's numbers were indicating. 103 00:05:27,330 --> 00:05:28,409 Sean Aylmer: Stephen, enjoy your week. 104 00:05:28,680 --> 00:05:29,130 Stephen Koukoulas: Thank you, Sean. 105 00:05:29,640 --> 00:05:32,400 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk, T- H- 106 00:05:32,400 --> 00:05:34,500 Sean Aylmer: E K- O- U- K. The Kouk, you can find 107 00:05:34,500 --> 00:05:37,200 Sean Aylmer: him at thekouk. com and follow him on X using 108 00:05:37,200 --> 00:05:40,770 Sean Aylmer: the handle TheKouk. I'm Sean Aylmer and this is Fearing and Greed, The Week Ahead.