Employment fell by 9,700 people in August. Economists had tipped job gains of around 10,000. The July result was revised to show job losses of 4,100 (previously job losses of 100). Full-time employment fell by 12,600 in August and part-time jobs rose by 2,800.
The annual employment growth rate eased from 1.7 per cent to 1.2 per cent – marking the weakest growth rate in 20 months. The unemployment rate rose from 5.1 per cent to 5.3 per cent – a 10 month high. The participation rate held steady at 65.6 per cent.
Average hours worked rose 0.3 per cent in August after rising by 0.2 per cent in July. Over the year average hours worked rose by 2.2 per cent.
Across the states and territories unemployment rates in August were: NSW 5.4 per cent (5.3 per cent in July); Victoria 5.1 per cent (5.1 per cent); Queensland 6.2 per cent (5.7 per cent); South Australia 5.1 per cent (5.2 per cent); Western Australia 4.4 per cent (4.0 per cent); Tasmania 5.2 per cent (5.1 per cent); Northern Territory 4.2 per cent (4.1 per cent); ACT 4.0 per cent (4.0 per cent).
NSW led the job gains in August (up 3,700) followed by Queensland (up 1,800). Western Australia Victoria the job losses (down 5,200), followed by South Australia (down 4,900), Victoria (down by 3,300), Northern Territory (down 800 in trend terms), Tasmania (down by 600) and ACT (down 100 in trend terms).
The working age population rose by 15,900 in August after lifting by 15,800 in July. The working age population grew by 1.3 per cent over the past year – the smallest gain in 11-years.
What is the importance of the economic data?
The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.).
The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.
If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.
What are the implications for interest rates and investors?
Reserve Bank forecasts have indicated that job creation should slow – it has – effectively ensuring conditions are more balanced in the labour market. The key question is what happens from here. While businesses are likely to pull back hiring plans due to the uncertain environment, it is still unlikely that significant job losses are around the corner.
The latest result cements our view that the Reserve Bank remains on the interest rate sidelines in the midterm. Importantly a case for a rate cut has yet to be proven. The Reserve Bank is unlikely to cut rates in an environment with such serious market volatility. In addition as the central bank has continued to point out the strength of the Chinese economy remains sound – ensuring that commodity prices are healthy and the boost to the terms of trade remains intact.