An unexpected fall in unemployment in March together with improved retail spending figures and gains in the stock market have prompted some analysts to suggest that the worst of the recession may be over.
The Australian economy is clearly in better shape than some had feared and much stronger than many of our trading partners overseas. However it would be premature to suggest that the recession is over (we still aren’t officially in recession until the March quarter GDP figures are published).
The fall in unemployment is contrary to nearly every other current economic indicator and anecdotal evidence. It is likely that the rise in employment in March is an anomaly and further weakness should be expected in the months to come. Likewise the retail spending figures for the March quarter are likely to have been boosted by the anticipated government stimulus payments and further weakness is likely (although April is also likely to produce a strong result as these payments filter through).
Unemployment is likely to peak later in 2009 although this may be lower than the 9% previously forecast. We expect rising unemployment to keep real estate prices subdued for the remainder of this year.
Tags: australia, australian economy, real estate, real estate market