JobKeeper bubble: True number of unemployed Aussies is unknown
According to recent figures from the Australian Bureau of Statistics, the number of unemployed Australians fell in February to 5.80% or 0.5% lower than it was in January. This figure is positive news, as it comes on the back of two consecutive quarters of GDP growth suggesting the economy is not only moving in the right direction but quicker than expected.
In February 2020, Australia was breaking records for the longest sustained economic growth without a recession with the seasonally adjusted unemployment rate at 5.1%, which means we are edging closer to pre-COVID-19 levels for employment growth. That said, there might be some skeletons in the closet given that the true number of unemployed is unknown, as JobKeeper has cushioned this although the expectation is that when this scheme ends at the end of the month job losses will increase.
The biggest losers have been tourism and hospitality and while these areas have recovered somewhat, it is far from pre-COVID levels and it is not likely to improve in the near future while international tourism is on hold. Another area of the economy that is suffering significantly is the loss of nearly $40 billion per annum from international students, which has dramatically affected universities, TAFEs and private education companies. Current estimates indicate that the number of international students studying in Australia will continue to fall and enrolments are unlikely to show a positive change until the 2023 intake.
Tourism and education are both large employers and sources of money flow into Australia, and with JobKeeper being wound up this month we may see many job losses in both areas. While I expect our economy to continue growing, until these two areas turn the corner and start the long road back to pre-COVID levels, I believe our economic growth will be subdued.
Best and worst performing sectors this week
Once again, the All-Ordinaries Index is displaying no real signs of any real direction in 2021, with the market up less than 1% for the year. Healthcare is the best performer up just under 2% while Communication Services and Consumer Discretionary are not far behind with both up more than 1%. The worst performing sectors include Materials down more than 2% while Consumer Staples and Energy are both just in the red for the week.
The best performers in the ASX/S&P top 100 stocks include Link Administration up more than 8% followed by Ansell and Charter Hall, both of which are up more than 6%. The worst performers include Suncorp and RIO, as both are down more than 5% followed by several stocks that are down more than 4% including BHP, Stockland, Fortescue and Bank of Queensland.
What's next for the Australian share market
While the All-Ordinaries Index has been flat during the first quarter of 2021 there are two indices that have been doing very well: the Emerging Companies Index up 25% and the MidCap50 index up 14%. When you see these sectors moving strongly, it is a sign that retail investors are speculating in ever-increasing numbers, which is typically a sign that the end of a bull-run or bubble is close. While I don't expect our market to crash, this is a strong sign that the All Ordinaries Index is due to pullback.
Until the market confirms it is moving up, I will continue to assume that there is a higher probability of it falling into a low. As mentioned last week, the market will break out of this current sideways pattern very soon, and I believe the move will be down. Therefore, we need to be prepared for it to fall into mid-April and for the market to trade down to below 6500 points. As I have stated previously, now is not the time to be entering the market, as investors would be better off waiting for the next confirmed run up.