Good news on jobs but inflation a worry

THE US inflation numbers are far more relevant – and seriously threatening – to your financial future than the local jobless numbers from the ABS that surfaced later on Thursday morning.

The jobless numbers were actually quite encouraging. They confirmed the surprisingly upbeat news in the latest – and more up-todate – official Roy Morgan numbers that I wrote about a couple of weeks back.

Now let me be very clear: I am not saying they were “happy days are here again” sort of numbers.

They were encouraging in relative terms – given that 55 per cent of the national economy was locked down.

Both the ABS and the Morgan numbers were taken right smack in the middle of the lockdowns in both NSW and Victoria.

Sifting through all the statistical noise caused by the lockdowns and the impact of JobKeeper 2.3, both suggested that jobs were holding up remarkably and surprisingly well, given that brutal reality. This was best captured in the ABS number, which showed the number of hours worked across Australia actually increased from a month earlier – early August.

The actual official jobless rate, which edged up from a very low 4.5 per cent to a slightly less still very low 4.6 per cent, was as utterly meaningless as it’s been since this whole Covidlockdown disaster kicked off.

They also point very encouragingly to the potential for a consumer spending boom through November and December, when Victoria joins NSW coming out of lockdown – given the $100bn-plus of savings built up in the hands of consumers.

The big question for Queensland and WA will be whether they want some of that money spent in their states – or are they going to continue to keep their borders closed to southerners and their dollars?

That’s the hopefully good news – Covid permitting.

It’s bad enough that inflation is now entrenched in the US – and it’s not all and only about rocketing energy prices because of shortages of the energy that actually works: coal, gas and petrol.

And with these shortages, just as the northern hemisphere – where the overwhelming majority of the 7 billion people on the planet live – heads into winter.

The (marginally) relatively good news is that US inflation is not, or at least not yet, entrenched in double digits. “Just”, right now, mid-to-high single digits. But the utterly unqualified bad news is that policy in the US is in the hands of blithering idiots, from the president down. And not only are they utterly incompetent, they are all frozen like rabbits in the glare of the spotlight.

Fed head Jerome Powell and his predecessor Janet Yellen, who is now President Biden’s treasury secretary, have spent the year not seeing the inflation that was gathering steam all around them.

They partly didn’t want to see it; quite frankly, they partly were too stupid to see it, far less understand what was driving it.

And mostly they were – frozen – petrified at what they would have to do, if they did see it: raise interest rates quickly and significantly.

Even in March they were still predicting it would be only 2 per cent by December – when it was already heading unstoppably higher.

Just two weeks ago Yellen finally conceded it would be “closer to 4 pent cent” by December.

It’s already 5 per cent cumulative in just nine months. It will be “closer to 6 per cent”, if they – and the rest of us – get lucky.

We are not going to get lucky.

The Fed should be raising its official rate from a starting point around 2-3 per cent. Powell is paralysed with the rate at zero.

This is not going to end well – for the share market, for the world. We face either something akin to runaway inflation or a form of stagflation.