Job losses but Aussies work longer hours

Labour force; Chinese trade data

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  Businesses ‘treading water’ with additional staff.

  Jobs & jobless rate: Employment fell by 10,200 in July after rising by a revised to 9,300 jobs created in June (previously reported as a 10,300 rise in jobs).

• The unemployment rate held steady at 5.7 per cent in July – a four year high. The participation rate fell from 65.3 per cent to 65.1 per cent. Full-time jobs fell by 6,800 in July after falling by 5,100 in June. Part-time jobs fell by 3,400 in July after rising by 14,400 in June.
• In the first seven months of 2013 part time jobs have risen by 77,500 while full time jobs have risen by just 11,000.
• Hours worked at record highs. The number of hours worked rose by 0.5 per cent in July to be up 1.7 per cent over the year to July.
• Unemployment across states and territories: NSW 5.6 per cent (5.4 per cent in June); Victoria 5.7 per cent (5.8 per cent); Queensland 5.9 per cent (6.3 per cent); South Australia 7.1 per cent (6.1 per cent); Western Australia 4.6 per cent (4.6 per cent); Tasmania 8.2 per cent (9.0 per cent); Northern Territory 5.3 per cent (5.2 per cent); ACT 3.6 per cent (3.8 per cent).
• Stronger Chinese trade data. China reported a healthy trade surplus in July. Exports and imports both printed above forecasts.

What does it all mean?

• It’s clear that the sluggishness in the broader economy is being reflected in the labour market. Businesses are treading water. Trading conditions are holding at the worst levels in four-years and employers are not keen to take on additional staff. However hours worked has lifted by 1.7 per cent over the past year and is now holding at record highs. It seems that employers are working existing staff longer hours.
• While employers are not out there significantly firing workers they are not adding to the workforce. Rather businesses are in a holding pattern, awaiting an improvement in conditions and managing staff hours. A broader view of the labour market data shows that businesses are still more inclined to hire part-time workers and contract staff than take on full-time staff. Part time employment lifted by almost 78,000 workers in the first seven months of 2013 compared with a paltry 11,000 full-time jobs created. The people getting jobs probably prefer full-time work to part-time work, and the loss in income, has had an indirect hit on discretionary retail spending.
• The Reserve Bank is well placed to cut rates again if it deems it is necessary. However the key question facing policymakers is how activity responds after the election is done and dusted. Businesses have been holding back investment plans until the election is out of the way, and if confidence improves then the Reserve Bank can stay on the interest rate sidelines. CommSec expects the labour market to improve over the latter part of 2013, after the election, and as firms get more confident about the outlook for their businesses and about the broader economy. Activity levels across the broader economy are only in the early stages of a recovery, largely driven by the improvement in housing activity – which should support employment over the early part of 2014.
• The Chinese trade accounts recorded a healthy surplus in July. And there was even further good news with a modest improvement in exports as well as imports. The improvement in imports is encouraging, suggesting that Chinese factories have restarted production and require raw materials to keep up with demand. Interestingly given that export growth also picked up, it could be that the build in inventories was to satisfy domestic Chinese demand as well as an improvement in the global economic activity. Only time will tell but the signs are positive.
• Overall the Chinese economy is running at a solid pace and other global economies are still buying Chinese products in healthy quantities. The data is good news for Australian resource producers, because China needs raw materials to churn out the finished goods.

What do the figures show?

Labour force:

• Employment fell by 10,200 in July after rising by a revised to 9,300 jobs created in June (previously reported as a 10,300 rise in jobs).
• In July, Full-time jobs fell by 6,800 in July after falling by 5,100 in June. Part-time jobs fell by 3,400 in July after rising by 14,400 in June. The unemployment rate held steady at 5.7 per cent in July – a four year high. The participation rate fell from 65.3 per cent to 65.1 per cent.
• The number of hours worked rose by 0.5 per cent in July to be up 1.7 per cent over the year to July.
• The annual employment growth rate fell from 1.4 per cent to 1.1 per cent in July. The working age population rose by 26,600 in July after lifting by 25,400 in June. The working age population grew by 1.8 per cent over the past year.
• Unemployment across states and territories: NSW 5.6 per cent (5.4 per cent in June); Victoria 5.7 per cent (5.8 per cent); Queensland 5.9 per cent (6.3 per cent); South Australia 7.1 per cent (6.1 per cent); Western Australia 4.6 per cent (4.6 per cent); Tasmania 8.2 per cent (9.0 per cent); Northern Territory 5.3 per cent (5.2 per cent); ACT 3.6 per cent (3.8 per cent).
• Queensland recorded the biggest job gains in July (up 18,400), followed by Tasmania (up 300). Jobs fell most in South Australia and Victoria (both down by 12,300), followed by NSW (down 7,400) and Western Australia (down 3,500). In trend terms jobs rose by 800 in the Northern Territory and rose by 300 in trend terms in the ACT.

Chinese trade figures:

• The Chinese trade accounts recorded a $17.82 billion surplus (forecast was for a surplus of $26.90 billion) in July. Exports rose 5.1 per cent in the year to July (forecast +2.0 per cent) while imports rose 10.9 per cent (forecast, +1.0 per cent).
• Over the year to July the trade surplus was US$264.7 billion, easing further away from the four-year high of $281.3 billion in the year to February
  • 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.
    • China’s Customs Office releases trade data around the 10^th of each month. China is the world’s second largest economy and Australia’s largest trading partner. Changes in the Chinese economy have major implications for the global and Aussie economy, exchange rates and interest rates.
    • The focus on part-time employment highlights the pressures being faced by the business sector. Trading conditions and profitability continues to be squeezed. In addition businesses are unlikely to focus on significant investment plans until the election is out of the way and confidence levels improve. As such the Reserve Bank looks set to maintain an easing bias. Although policymakers are likely to keep rates unchanged over the next couple of months while attempting to gauge if activity levels pick up after the election.

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.
• China’s Customs Office releases trade data around the 10^th of each month. China is the world’s second largest economy and Australia’s largest trading partner. Changes in the Chinese economy have major implications for the global and Aussie economy, exchange rates and interest rates.

What are the implications for interest rates and investors?

• The focus on part-time employment highlights the pressures being faced by the business sector. Trading conditions and profitability continues to be squeezed. In addition businesses are unlikely to focus on significant investment plans until the election is out of the way and confidence levels improve. As such the Reserve Bank looks set to maintain an easing bias. Although policymakers are likely to keep rates unchanged over the next couple of months while attempting to gauge if activity levels pick up after the election.