The indicators look great, but the recovery is very uneven across the economy

In the vicinity of my office at the Johnson Hotel on Boundary St, Spring Hill, I see the ongoing impacts of the pandemic on the economy. The hotel restaurant-cafe Tumbling Stone hasn’t reopened since it shut in March last year, the IGA at Spring Hill Marketplace has been forced to close because it fell behind on the rent, and the street is no longer full of Chinese and Korean students attending classes at IES. It’s all very disheartening.

The economic recovery, which is strong overall according to all the latest data, including today’s ABS Labour Force figures (see chart below), is obviously very uneven across the economy. It’s a K-shaped recovery, as they say.

Queensland is leading Australia in the recovery in hours worked and employment.

Many tourism, hospitality, international education, and live music and entertainment businesses continue to struggle, while many builders and retailers are experiencing strong demand. Ultra-low interest rates and massive government stimulus measures have helped a lot, as has the redirection to the domestic economy of spending Australians would otherwise have undertaken overseas while on holidays.

Now that JobKeeper and the Coronavirus Supplement have finished we need to see how the economy fares over the next few months. We also need to consider that Winter is coming and our vaccination rollout is very slow, and we could see new lockdowns in the future.

Regardless of the risks, so far consumers are remaining confident, and consumer sentiment is at an eleven-year high (see chart below). Fingers crossed we’ll get through the next few months okay and the economic recovery will become more broadly based.

Consumer sentiment in Australia is at an eleven-year high.

For analysis of today’s Labour Force data, see Pete Faulkner’s post:

Once again Labour Force data smashes expectations. Unemployment rate falls to 5.6%

Also, check out Queensland Treasury’s Labour Force brief.

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