Employment rose by 44,000 in March after falling by 15,400 in February; economists had expected a 7,000 lift in jobs.
- Healthy mix in jobs: In March part-time jobs rose by 28,200 after falling by 14,400 in February. Full-time jobs rose by 15,800 after falling by 1,000 in February.
- Jobless rate steadies: The unemployment rate remained at 5.2 per cent in February. The participation rate rose modestly from 65.2 per cent to 65.4 per cent.
- More hours worked: The number of hours worked rose by 0.6 per cent in March to be up 0.9 per cent in annual terms.
- Unemployment across states and territories: NSW 4.8 per cent (5.1 per cent in March); Victoria 5.8 per cent (5.5 per cent); Queensland 5.5 per cent (5.7 per cent); South Australia 5.2 per cent (5.2 per cent); Western Australia 4.1 per cent (3.9 per cent); Tasmania 7.0 per cent (7.0 per cent); Northern Territory 4.0 per cent (4.1 per cent); ACT 3.6 per cent (3.7 per cent).
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 latest March result follows the modest fall in employment in February and a more sizeable fall December. In fact over the past five months employment growth has totalled just 36,400 positions – or around 7,000 jobs a month. The month to month data can certainly be volatile. However even a smoothed longer term view confirms the sluggishness in the labour market. Employment is barely growing having recorded an anaemic annual growth rate of just 0.3 per cent.
What is clear is that the labour market is going sideways. Yes it was encouraging that employment grew in March but looking forward a sustained pickup in employment will be needed to justify a turnaround in the fortunes of job seekers.
While the jobs data is largely backward-looking, it is still the case that an additional 44,000 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 – especially given the latest pessimistic reading on the consumer sentiment front.
From a business perspective there is no doubt that trading conditions will remain difficult and profitability continue to be 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.
Interestingly the number of hours worked rose in March and while that is a positive result it comes of a low base. In fact in annual terms hours worked increased by a rather modest 0.9 per cent. 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 Reserve Bank would have to be seriously considering the need to cut interest rates next month. Activity levels have been subdued, consumers are despondent and the downside risks to the global economy all suggest that the Reserve Bank should err on the side of caution – particularly given inflation looks to be well contained.
What do the figures show?
Labour force:
- Employment rose by 44,000 in March after falling by 15,400 in February. Economists had expected a 7,000 lift in jobs. Part-time jobs rose by 28,200 after falling by 14,400 in February. Full-time jobs rose by 15,800 after falling by 1,000 in February.
- The annual employment growth rate rose from 0.2 per cent to 0.3 per cent in March – just shy of the weakest growth rate in almost 19 years.
- The unemployment rate remained at 5.2 per cent in February. The participation rate rose modestly from 65.2 per cent to 65.4 per cent.
- The number of hours worked rose by 0.6 per cent in March after rising by 1.1 per cent in February. Hours worked is up just 0.9 per cent on a year ago.
- Unemployment across states and territories: NSW 4.8 per cent (5.1 per cent in March); Victoria 5.8 per cent (5.5 per cent); Queensland 5.5 per cent (5.7 per cent); South Australia 5.2 per cent (5.2 per cent); Western Australia 4.1 per cent (3.9 per cent); Tasmania 7.0 per cent (7.0 per cent); Northern Territory 4.0 per cent (4.1 per cent); ACT 3.6 per cent (3.7 per cent).
- NSW led the job gains in March (up 19,100), followed by Victoria (+11,500), Queensland (+7,900), Western Australia (+5,000), and South Australia (+2,100). Jobs fell most in Tasmania (-2,300). In trend terms employment rose in Northern Territory (+300) and ACT (+200).
- The working age population rose by 18,400 in March after lifting by 18,500 in February. The working age population grew by 1.23 per cent over the past year – equal to the smallest gain in almost 12 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 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.
The soft domestic data in recent weeks adds highlights the need for a rate cut. In our judgement the next interest rate cut should take place in May.
