Labour force
- Employment rebounded in March, lifting by 37,800 people. Economists had tipped job gains of 20,000 (range from +5,000 to +30,000 jobs). The February result was revised to show job losses of 8,600 people (previously -10,100). Full-time employment rose by 32,100 in March (February jobs were up by 50,400) and part-time jobs rose by 5,700 (February jobs fell by 58,900). The unemployment rate eased from 5.0 per cent to 4.9 per cent (4.92 per cent to two-decimal places – 27 month low). The participation rate rose from 65.7 per cent to 65.8 per cent. The working age population rose by 18,900.
- Jobs jump around from month to month. But over the past four months employment has lifted by 44,100 or just over 11,000 jobs per month – below the growth rate of new entrants. Trend employment rose 8,600 in March – slowest in 20 months. Employment is growing at a more sustainable pace.
- In trend terms, male unemployment is 4.6 per cent while the female jobless rate is 5.3 per cent. Thus the two-speed economy. Mining and engineering are strong; retail and services sectors are soft.
- Average hours worked rose by 0.8 per cent in March after lifting by 1.2 per cent in February.
- NSW has the highest unemployment in the nation at 5.8 per cent. Across the states and territories unemployment rates in March were: NSW 5.8 per cent (4.9 per cent in February); Victoria 4.5 per cent (5.0 per cent); Queensland 5.5 per cent (5.6 per cent); South Australia 5.4 per cent (5.8 per cent); Western Australia 4.2 per cent (4.2 per cent); Tasmania 5.6 per cent (5.6 per cent); Northern Territory 2.4 per cent (2.4 per cent); ACT 3.2 per cent (3.3 per cent).
- Employment rose the most in Western Australia (up 12,900) followed by Queensland (up 11,900), South Australia (up 7,400), Victoria (up 6,500), and Northern Territory (up 800), Tasmania (up 700), ACT (up 100). Jobs fell 5,200 in NSW.
What does it all mean?
- No economist worth his or her salt ever takes the monthly job market data at face value. Otherwise you would actually believe that the NSW jobless rate really did rise from 4.8 per cent to 5.1 per cent in one month. It is always a case of tracking trends over time. A calm, rationale approach to assessing job figures is always necessary.
- Employment growth slowed late last year to a more sustainable rate while the jobless rate has gently eased over the past seven months. The Reserve Bank has indicated that job creation has slowed – it has – thus justifying its relaxed position on economic conditions.
- Interestingly the male jobless rate has consistently eased in trend terms over the past year while the female jobless rate has gone nowhere. In fact the gap in favour of men hasn’t been wider for almost four years. Women tend to make the purchasing decisions in households and they aren’t seeing the same job market strength as men, so it makes sense that spending has stagnated.
- You can understand why the Reserve Bank left rates unchanged this week – it is hard to get a clear reading of the economy at present. Consumers aren’t spending, home loans are at decade lows and some prices are going up with others going down. Then you have a job market which seemingly is weak one month and indestructible the next. As always the truth lies in between.
- It is clear that the economy has lost momentum. With the job market it is always important to look at trends over time. Over the past four months jobs rose by just over 44,000 or around 11,000 a month. While employment appeared to be going gangbusters in March, over time job creation has slowed to a more sustainable pace.
- It is important to remember that employment is a lagging indicator – it reflects hiring decisions made as much as 5-6 months ago. And that was before the floods and Japanese earthquake. But other indicators like home loans are forward-looking. If people aren’t taking out loans, especially for construction, then it suggests that jobs may begin drying up. For the Reserve Bank, the safest place is on the interest rate sidelines.
- CommSec believes that the Reserve Bank would be comfortable with interest rate settings given the soft spending and housing market conditions and slowdown in job creation. Rates are on hold for at least the next three months until the Reserve Bank gets more clarity on the economy.
- Certainly builders and retailers will be happy with today’s employment result. The job market is still healthy with employment still rising in trend terms. The main challenge is to get consumers confident and spending again – but given all the natural disasters of late, that will take time.
- Western Australia, ACT and Northern Territory have unemployment well below 5 per cent and aren’t generating super-normal wage increases. So we need to rethink where “full employment” lies. But there should be no complacency in the Government. The aim is to increase the supply of labour – through training, incentives to move from high unemployment to low unemployment areas and immigration.
What do the figures show?
Labour force
- Employment rebounded in March, lifting by 37,800 people. Economists had tipped job gains of 20,000 (range from +5,000 to +30,000 jobs). The February result was revised to show job losses of 8,600 people (previously – 10,100). Full-time employment rose by 32,100 in March (February jobs were up by 50,400) and part-time jobs rose by 5,700 (February jobs fell by 58,900).
- The unemployment rate eased from 5.0 per cent to 4.9 per cent. The participation rate rose from 65.7 per cent to 65.8 per cent.
- Over the past four months employment has lifted by 44,100 or just over 11,000 jobs per month – below the growth rate of new entrants. And trend job growth in March was 8,600. Overall it is clear that employment is growing at a more sustainable pace.
- Average hours worked rose by 0.8 per cent in March after lifting by 1.2 per cent in February.
- NSW has the highest unemployment in the nation at 5.8 per cent. Across the states and territories unemployment rates in March were: NSW 5.8 per cent (4.9 per cent in February); Victoria 4.5 per cent (5.0 per cent); Queensland 5.5 per cent (5.6 per cent); South Australia 5.4 per cent (5.8 per cent); Western Australia 4.2 per cent (4.2 per cent); Tasmania 5.6 per cent (5.6 per cent); Northern Territory 2.4 per cent (2.4 per cent); ACT 3.2 per cent (3.3 per cent).
- Employment rose most in Western Australia (up 12,900) followed by Queensland (up 11,900), South Australia (up 7,400), Victoria (up 6,500), and Northern Territory (up 800), Tasmania (up 700), ACT (up 100). Jobs fell 5,200 in NSW.
- The working age population rose by 18,900 in March after lifting by 19,200 in February. The working age population grew by 1.66 per cent over the past year – the smallest gain in over five 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?
- CommSec believes that official rates will stay on hold for the next three months. We still believe rates will rise – but gradually – pencilling in rate hikes in August and November.
- Overall, the job market is healthy, pointing to strong housing and retail spending in the second half of 2011.
- The main constraint on the economy is jobs. If the Government isn’t proactive in boosting labour supply it will be held responsible for mining and engineering projects that don’t go ahead, any delays in rebuilding in Queensland and if wages start to accelerate, boosting interest rates.
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