Employment rose by 46,300 in January after a revised 35,700 fall in December (previously reported as a 29,300 decline). Economists had expected a 10,000 lift in jobs.
- Healthy mix in jobs: In January part-time jobs rose by 34,000 after falling by 59,700 in December. Full-time jobs rose by 12,400 after rising by 24,000 in December.
- Jobless rate eases: The unemployment rate fell from 5.2 per cent to 5.1 per cent in January. The participation rate rose modestly from 65.2 per cent to 65.3 per cent.
- Less hours worked: The number of hours worked fell by 1.4 per cent in January to be up just 0.2 per cent in annual terms – marking the weakest growth rate in two years.
- Unemployment across states and territories: NSW 5.2 per cent (5.6 per cent in December); Victoria 5.1 per cent (unchanged); Queensland 5.4 per cent (unchanged); South Australia 5.1 per cent (5.3 per cent); Western Australia 4.2 per cent (unchanged); Tasmania 7.0 per cent (6.3 per cent); Northern Territory 4.2 per cent (unchanged); ACT 3.7 per cent (unchanged).
What does it all mean?
- At first glance the latest employment figures are heartening – a pickup in jobs across the economy. But the result needs to be put into perspective. The job losses in December were revised higher to show almost 36,000 positions were cut, and in effect the January result just negates those losses. What is clear is that the labour market is going sideways. Yes it was encouraging that employment grew in January but looking forward a sustained pickup in employment will be needed to justify a turnaround in the fortunes of job seekers.
- Interestingly the number of hours worked fell in January and in annual terms hours worked barely increased growing by just 0.2 per cent – marking the weakest growth rate in two years. It’s clear that the lack of momentum in the domestic economy is being reflected in the labour market. Employers are looking at avenues to remain profitable and subduing costs is a clear priority.
- The rate cuts late last year will help to support activity in coming months and provide businesses with a bit more breathing space. But there is no doubt that trading conditions are difficult and profitability is being affected. In addition the strength of the Australian dollar will continue to cripple manufacturing, tourism and exports outside the resources space. As a result it is more likely that businesses will hold onto current staff rather than significantly adding to their workforce.
- Still, comparing the job market in Australia with markets in Europe or the US is like comparing chalk with cheese. Australia’s job market remains healthy, supporting growth in the broader economy. And it is still the case that an extra 46,000 odd workers now have jobs compared with a month ago. And that means more latent spending power. Of course in the current environment people are still more likely to be saving rather than spending.
- The jobs data is unlikely to make waves at the Reserve Bank. Rather the central bank will be more focused on the current situation in Euro Zone and even the slowdown in China. Any escalation of the Euro Zone debt crisis is likely to prompt the Reserve Bank to move sooner rather than later when it comes to rates. In our judgement – and assuming Europe still muddles through in the next few weeks – the next interest rate cut won’t occur until May – after the next round of inflation data. However the risks are policymakers move earlier.
What do the figures show?
- Employment rose by 46,300 in January. Economists had tipped job gains of around 10,000. The December result was revised from an initially reported loss of 29,300 people to a loss of 35,700. Full-time employment rose by 12,400 in January and part-time jobs rose by 34,000.
- The annual employment growth rate held at 0.3 per cent in January – just shy of the weakest growth rate in almost 19 years. The unemployment rate fell from 5.2 per cent to 5.1 per cent in January. The participation rate rose from 65.2 per cent to 65.3 per cent.
- Average hours worked fell by 1.4 per cent in January after rising by 0.2 per cent in December. The number of hours worked is up 0.2 per cent on a year ago – the slowest annualised growth in hours worked in two years.
- Across the states and territories unemployment rates in January were: NSW 5.2 per cent (5.6 per cent in December); Victoria 5.1 per cent (unchanged); Queensland 5.4 per cent (unchanged); South Australia 5.1 per cent (5.3 per cent); Western Australia 4.2 per cent (unchanged); Tasmania 7.0 per cent (6.3 per cent); Northern Territory 4.2 per cent (unchanged); ACT 3.7 per cent (unchanged).
Queensland and Western Australia led the job gains in January (up 20,000), followed by NSW (+10,900), South Australia (+3,200). Employment was flat in Victoria. Jobs fell in just Tasmania (-4,100). In trend terms employment rose in Northern Territory (+200) and ACT (+500). - The working age population rose by 18,500 in January after lifting by 21,100 in December. The working age population grew by 1.2 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? - The latest jobs result was encouraging however given that employment growth is crawling of a low base it is likely that conditions in the labour market will remain soft over the first half of 2012. – as a result it is likely that the unemployment rate will rise modestly toward 5.7 per cent over the coming year.
- The recent rate cuts will help to support activity at the margin, but given the ongoing concerns in Europe and no clear resolution to the debt crisis it is likely that the Reserve Bank will cut rates sooner rather than later.