Job ads hit 18-month high; Cash holdings soar
Job market; Cash holdings; Reserve Bank assets; Commodity prices
Job ads: Job ads, as measured by ANZ, rose by 9.2 per cent in December to an 18-month high. Job ads are up 5.0 per cent on the year.
Bank notes: The amount of bank notes in circulation rose by $1.6 billion or 1.7 per cent to a record $98.6 billion in December. The amount of $50 notes continues to soar – up 23.8 per cent on a year ago – the fastest annual growth in 12 years.
Job ads are an important gauge on the direction of the job market and consumer spending. Banknotes and Reserve Bank balance sheet trends are important in tracking confidence and liquidity in the economy.
What does it all mean?
• The economic recovery continues. Yesterday, data showed rising home prices and strong activity in the manufacturing sector. Today, data showed another solid lift in hiring intentions with job ads rising more than 9 per cent in December after a 13.5 per cent gain in November. The lift in hiring intentions should translate to higher employment in coming months, supporting spending.
• In uncertain economic times, Aussies have shown a tendency to hold more physical cash. And this time is no different. There is currently almost $100 billion of bank notes in circulation, around $3,800 on average for every Aussie. And the majority of the cash in the economy is in $50 and $100 notes. The value of $50 notes is up almost 24 per cent on the year with the value of $100 notes up over 13 per cent.
• The Reserve Bank has been actively expanding its balance sheet to ensure there is plenty of liquidity in the economy. Over the past year, the value of Australian dollar investments has lifted by over $170 billion.
What do the figures show?
Job advertisements – December
• Job ads, as measured by ANZ, rose by 9.2 per cent in December to an 18-month high. Job ads are up 5.0 per cent on the year. In the past eight months, job ads have rebounded by 98.3 per cent.
Bank notes in circulation
• The amount of bank notes in circulation rose by $1.6 billion in December or 1.7 per cent to a record $98.6 billion. The value of bank notes is up by 17.4 per cent over the year.
• The amount of $50 notes in circulation rose by $1.1 billion or 2.3 per cent in December to stand 23.8 per cent higher than a year ago – the fastest annual growth in 12 years.
• The amount of $100 notes in circulation rose by $346.2 million in December or 0.8 per cent. Annual growth has slowed from a 29-year high of 15.8 per cent in October to 13.6 per cent in December.
Reserve Bank assets & liabilities
• The value of gold and foreign exchange held by the Reserve Bank stood at a 6-year low of $59.778 billion at the end of 2020, down 31 per cent over the year.
• In contrast, the value of Australian dollar investments at the Reserve Bank stood at a record $260.3 billion at the end of 2020, up $171.5 billion or 193 per cent on a year ago.
Reserve Bank Commodity index
• Over the year to December the Reserve Bank commodity index rose 16.6 per cent in US dollar terms – the fastest annual growth in more than three years. Including bulk commodity spot prices, the index was up by 24.6 per cent on the year.
• Bulk commodity spot prices (non-rural) were up 50.4 per cent on the year in US dollar terms – the fastest annual rate in 44 months.
What is the importance of the economic data?
• The monthly ANZ Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• The Reserve Bank releases a raft of financial markets data on a regular basis that can provide insights into trends in the broader economy.
What are the implications for investors?
• Businesses continue to re-open, re-build and re-hire workers. A stronger job market means the Reserve Bank can stay on the monetary policy sidelines. A healthier job market will support overall economic activity, confidence and spending.
• Commodity prices continue to lift on Chinese demand and hopes of higher global infrastructure spending. Mining share prices are solidly supported on a fundamental basis.
Published by Craig James, Chief Economist, CommSec