Employment rose by 10,400 in January after an improved result for December.
- In December, employment fell by 3,800 jobs, not 5,500 as previously reported. Economists had expected a 5,000 lift in jobs in January.
- In January, full-time jobs fell by 9,800 after falling by 13,900 in December. Part-time jobs rose by 20,200 after rising by 10,100 in December.
- The unemployment rate was steady at 5.4 per cent in January. The participation rate eased from 65.1 per cent to 65.0 per cent – a six year low.
- The number of hours worked fell by 0.2 per cent in January after an upwardly-revised gain of 0.1 per cent in December. Hours worked stand 1.2 per cent higher than a year ago.
- Unemployment across states and territories: NSW 5.1 per cent (5.1 per cent in December); Victoria 6.1 per cent (5.6 per cent); Queensland 5.5 per cent (6.1 per cent); South Australia 6.1 per cent (5.8 per cent); Western Australia 4.0 per cent (4.3 per cent); Tasmania 7.8 per cent (7.4 per cent); Northern Territory 3.9 per cent (3.9 per cent); ACT 4.5 per cent (4.4 per cent).
What does it all mean?
There is something for everyone in the latest jobs data. The optimists could focus on the rise in overall employment and conclude all is fine. The pessimists would look at the third consecutive fall in full-time jobs coupled with the fall in hours worked and conclude something more concerning.
What is clear is the job market isn’t shooting the lights out but by no means is unemployment soaring. In a big picture sense the job market is in a holding pattern with a modest degree of softening.
Yes, it was encouraging that employment grew but more forward looking indicators like job advertisements have suggested that further labour market gains may be more circumspect. In fact internet and newspaper job advertisements have fallen for 11 consecutive months, suggesting job growth is likely to flat line in coming months.
Of course, the figures shouldn’t be taken literally. The data is volatile from month to month and there is a fair margin for error. And the more smoothed trend figures suggest that the job market is largely flat with the unemployment rate generally holding in a 5.2-5.4 per cent range.
Employers aren’t keen to hire unless they have to, given the global uncertainties. But while jobs are being lost in some industries, clearly they are being created in other industries. Overall it does seem like a fair proportion of Aussie businesses are holding onto existing staff, rather than culling staff or significantly adding to the workforce.
In a perverse way the unemployment rate is holding steady because more people gave up the search for work. A smaller proportion of people are in the workforce – people in jobs or are looking for work – with the participation rate holding at a six-year low. Overall the fall in the participation rate is not as concerning as it may sound. Previous reports that we have published on participation rates and demographics have highlighted that a lot more of the younger workforce are opting for higher education given the sluggish labour market. And as activity levels pickup and employers are keener to hire, the participation rate is likely to also to rise.
Over the past year the missing ingredient in the domestic economy has been confidence, however there are anecdotal signs that there is an improvement in confidence. Rate cuts, healthy house prices and rising share markets should provide some level of encouragement to policymakers, households and businesses.
While the overall jobless rate for Australia didn’t budge in January, that wasn’t the case with results for states and territories. But the data for the states and territories should be taken with a grain of salt. It is highly unlikely that the jobless rate plunged in Queensland and Western Australia in January but soared in Victoria, Tasmania and South Australia.
Overall the job market has softened somewhat given caution about the global economy, but not dramatically so. The smart employers are not shedding staff, rather showing greater flexibility in hiring of staff and the number of hours worked by existing staff.
What do the figures show?
- Employment rose by 10,400 in January after an improved result for December.
- In December, employment fell by 3,800 jobs, not 5,500 as previously reported. Economists had expected a 5,000 lift in jobs in January. In January, full-time jobs full-time jobs fell by 9,800 after falling by 13,900 in December. Part-time jobs rose by 20,200 after rising by 10,100 in December.
- The annual employment growth rate fell from 1.3 per cent to 0.9 per cent in January. The working age population rose by 37,500 in January after lifting by 24,500 in December. The working age population grew by 1.72 per cent over the past year.
- The unemployment rate was steady at 5.4 per cent in January. The participation rate eased from 65.1 per cent to 65.0 per cent – a six year low. The number of hours worked fell by 0.2 per cent in January after an upwardly-revised gain of 0.1 per cent in December. Hours worked stand 1.2 per cent higher than a year ago.
- Unemployment across states and territories: NSW 5.1 per cent (5.1 per cent in December); Victoria 6.1 per cent (5.6 per cent); Queensland 5.5 per cent (6.1 per cent); South Australia 6.1 per cent (5.8 per cent); Western Australia 4.0 per cent (4.3 per cent); Tasmania 7.8 per cent (7.4 per cent); Northern Territory 3.9 per cent (3.9 per cent); ACT 4.5 per cent (4.4 per cent).
- Queensland recorded the biggest job gains in January (+30,200), followed by NSW (+8,100), Western Australia (+2,100), Northern Territory (unchanged in trend terms) and the ACT (+ 200 in trend terms). Jobs fell most in Victoria (-30,000), followed by South Australia (down 3,100) and Tasmania (-1,500).
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 rate cuts in recent times will help to support activity and continue to provide businesses with more breathing space – especially given that trading conditions are difficult. As a result it is more likely that businesses will hold onto current staff rather than culling employees their existing workforce.
The jobs data will be closely watched by the Reserve Bank in coming months. An array of indicators has suggested that activity levels have bottomed out and showing modest signs of improving. Policymakers will want to get a better gauge of what is going on before electing to cut rates again. CommSec expects interest rates to remain largely on hold over the next couple of months.
The chance of a rate cut in March has receded following the employment figures. Market pricing is now 47 per cent chance of a quarter per cent rate cut compared with 55 per cent before the data release.