The latest jobs figures appeared too strong for an economy that just a day earlier was being emphasised as week by the RBA governor.
The speech by Glenn Stevens focused on the need for public sector infrastructure spending to support the economy.
Despite the talk of a weak economy, Thursday’s employment figures were unexpectedly strong, with the fastest annual growth rate for four years and a fall in the jobless rate to 6.0 per cent, a one-year low.
ANZ economists Daniel Gradwell and Felicity Emmett said the strong jobs growth would not be sustained.
“Economic growth is still below trend, and is likely to remain so, while the likelihood of further job losses in the mining industry will also apply upward pressure to the unemployment rate,” they said.
AMP’s Shane Olive was sceptical.
“The May jobs data support the view that the economy is nowhere near as weak as the doomsayers would have it,” he said.
“However, they likely also exaggerate the strength in the jobs market.”
But others saw the figures as consistent with the big shifts underway in the economy.
“Abstracting from the monthly volatility, recent data shows that Vic and NSW have been largely driving national employment growth which reflects in part the strong residential upturn underway in both Sydney and Melbourne,” Commonwealth Bank’s John Peters said.
NAB’s David de Garis took a similar line, noting the concentration of strong jobs trends in the eastern states.
“This is consistent with the growth transition story with strength in non-mining currently sufficiently to stabilise unemployment – though it’s likely WA employment will decline somewhat in coming months,” he said.
HSBC’s Paul Bloxham said the figures would normally be seen as a convincing sign that growth is picking up, but said there were challenges to that view this time around, including the uncertain role of the mining boom and measurement issues with the jobs data.
“Nonetheless, these numbers need to be taken seriously, partly because the trend in them is becoming more convincing as each month passes,” Mr Bloxham said.
St George Bank’s Janu Chan said the coincidence of strong jobs growth and weak economic growth was “somewhat puzzling”, but saw a way to reconcile them.
“Slow wage growth could help explain why job gains remain solid, and hint at greater flexibility in the labour market than previously,” she said.
“This could continue to support job growth and prevent the unemployment rate from climbing sharply.”