CBA senior economist Kristina Clifton agreed the central bank will pay close attention to the employment data.
“One of the things that the RBA has been saying is that one of their risks to the outlook comes down to consumer spending and how households are managing,” said Ms Clifton.
In an environment of falling dwelling prices and high debt levels, a strong jobs market helped offset these factors that weigh on consumers, said Ms Clifton.
House prices fell 4.8 per cent nationally in the year to December 2018according to CoreLogic. Sydney prices fell 8.9 per cent and Melbourne prices fell 7.0 per cent over the same period.
Another factor weighing on consumers is decreased confidence. The Westpac-Melbourne Institute Consumer Sentiment Indexsuffered its largest monthly fall in three years last week, slipping to 99.6 points in December 2018, an indication that pessimistic consumers now outweighed optimists.
CBA’s Ms Clifton predicted Thursday’s job data to show “a 20,000 lift in the number of jobs in the month and we have a tick down in the participation rate, back down to 65.6 and that should see the unemployment rate tick down to 5 per cent”.
The November 2018 jobs figures from the ABS showed unemployment rise 0.1 per cent, from 5 per cent in October to 5.1 per cent in November, economists had expected the rate to hold flat.
37,000 jobs were created from October to November 2018, however this came from 43,400 part-time positions and a reduction of 6,400 full-time positions.
NAB senior economist David De Garis said he was forecasting higher than consensus jobs growth through December 2018.
“We’re going to see another pretty strong print in employment, our estimate is that employment probably rose by about 25,000, so it’s suggesting that the employment story is continuing to unfold.”
Mr De Garis said the jobs data was a “very pervasive indicator of the economy, the market is very sensitive to this particular indicator”. However, Mr De Garis said the month to month data was volatile and subject to sample rotation effects which had the potential to skew the results.
On Wednesday, the six month annualised growth rate in the Westpac-Melbourne Institute Leading Index fell 0.27 per cent in December. The negative result suggested that economic activity “growth has slowed from a solid above trend pace to at or below trend going forward,” said Westpac chief economist Bill Evans.
According to RBC’s Mr Thompson, the leading indicators for the labour market, like job vacancies data, were fine and he was “not expecting any negativity to come through”.
ABS job vacancies data released at the beginning of Januaryshowed total job vacancies grew 1.7 per cent to 242,900 vacancies from August to November 2018.