Largest jobs gains on record… apparently

Labour force; Chinese inflation

• 

  Employment growth surpassed optimistic expectations.

  Jobs gains: Employment rose by a record high 121,000 in August after falling by a revised 4,100 in July (previously reported as a 300 fall in jobs). Full-time jobs rose by 14,300 in August after rising by 15,400 in July. Part-time jobs rose by 106,700 in August after falling by 4,100 in July.

• A total of 236,500 new jobs have been created in the first eight months of 2014 – the best start to a calendar year since 2005.
• Jobless rate slides: The unemployment rate fell from 6.4 per cent to 6.1 per cent in August. The participation rate rose from 64.9 per cent to 65.2 per cent.
• Hours worked was unchanged in August after falling by 1.0 per cent in July. Hours worked are up 0.6 per cent over the year.
• Tame Chinese inflation: Producer prices fell by 1.2 per cent in the year to August (median forecast was for a 1.1 per cent decline). Consumer prices rose by 2.0 per cent over the year (median forecast 2.2 per cent).
• In August, consumer prices rose by 0.2 per cent. Producer prices fell by 0.2 per cent.

What does it all mean?

• Employment growth surpassed even our rather optimistic expectations. Part time jobs growth of over 106,000 jobs or a record total (part time plus full-time) 121,000 jobs in one month? Well it is hard to take this at face value, and no doubt there is some level of statistical discrepancy. But it does resonate with the lift in the employment landscape conditions over the past year. And more importantly rather than focusing on one month’s data the broader trend shows a similar picture.
• Last year employers were working existing staff longer and there had been a lift in productivity, while it is now clear that employers are adding to the workforce – whether it is part time or full-time roles. In fact jobs growth has been solid with almost 127,000 full-time jobs having been created in the first eight months of 2014 – marking the best start to a calendar year in four years.
• The one key positive out of the super-strong result is that it should ease concerns about the labour market. All the noise about the prior result – 12–year high unemployment rate in July- dampened consumer confidence. However this time round despite the lift in the participation rate – which suggests more people are looking for work – the unemployment rate eased back to 6.1 per cent. The latest result should help to ease some of those concerns. An improvement in confidence would certainly bode well for retail activity and broader economic growth.
• Labour market conditions have certainly improved in recent months. Business conditions are healthy, profitability has improved and more importantly forward order books are starting to fill up. No doubt the business sector is feeling more comfortable hiring as can be seen by the ongoing lift in job advertisements. More people are looking for work and more people are finding work as well – a result that should increase household incomes.
• The Reserve Bank would certainly be feeling a bit more comfortable. It’s all running pretty much to plan. Even the recent US dollar strength has resulted in the Aussie dollar falling to a six-month low. Clearly the Reserve Bank has no need to be moving rates in any direction at present. The earliest timing of the first rate hike is February next year, but it requires a further improvement in activity levels and a stronger lift in employment.
• Chinese inflation remains benign and is certainly no threat to the broader Chinese economy. Consumer inflation is healthy without being excessive and business inflation is still contracting. More importantly the data in recent weeks suggests the Chinese economy has found a solid base and has lifted after a lacklustre start to the year. If growth doesn’t rebound Chinese authorities are certainly well placed to provide further stimulus.Focus will shift to the retail sales, industrial production and fixed asset investment figures due out on Saturday.

What do the figures show?

Labour force:

• Employment rose by a record high 121,000 in August after falling by a revised 4,100 in July (previously reported as a 300 fall in jobs). Full-time jobs rose by 14,300 in August after rising by 15,400 in July. Part-time jobs rose by 106,700 in August after falling by 4,100 in July.
• The unemployment rate fell from 6.4 per cent to 6.1 per cent in August. The participation rate rose from 64.9 per cent to 65.2 per cent.
• The number of hours worked was unchanged in August after falling by 1.0 per cent in July. Hours worked are up 0.6 per cent over the year.
• The annual employment growth rate rose from 0.9 per cent to 2.2 per cent in August. The working age population grew by 26,100 people in August and by 3441,700 over the year or 1.82 per cent.
• Unemployment across states and territories: NSW 5.7 per cent (July 5.9 per cent); Victoria 6.8 per cent (7.0 per cent); Queensland 6.7 per cent (6.8 per cent); South Australia 5.9 per cent (7.2 per cent); Western Australia 5.0 per cent (5.2 per cent); Tasmania 7.1 per cent (7.6 per cent). Trend unemployment Northern Territory 4.8 per cent (4.6 per cent); ACT 4.6 per cent (4.3 per cent).
• Jobs across states and territories: NSW +45,300; Victoria +26,100; Queensland +26,500; South Australia +16,800; Western Australia +9,600; Tasmania +3,800. Trend employment Northern Territory +200; ACT +700.

Chinese inflation data

• The annual rate of consumer price inflation fell from 2.3 per cent in July to 2.0 per cent in August. The result was below forecasts for annual growth of 2.2 per cent. Over the month consumer prices rose by 0.2 per cent, mildly weaker than forecasts.
• Food prices rose by 0.7 per cent in August after falling by 0.1 per cent in July with non-food prices down 0.1 per cent in August. Pork prices lifted by a much more sedate 0.1 per cent in August. Over the year to August, food prices rose by 3 per cent while non-food prices were up by 1.5 per cent.
• Annual price growth: Clothing prices rose by 2.6 per cent in the year to August; tobacco & liquor prices fell 0.6 per cent annually; transport & communications rose 0.2 per cent annually; household equipment & maintenance prices were up 1.1 per cent annually; healthcare & personal products rose by 1.4 per cent annually; entertainment & educational rose 1.9 per cent annually.
• Producer prices (business inflation) fell by 0.2 per cent in August. Producer prices in August were 1.2 per cent lower than a year ago. Economists had tipped a 1.1 per cent annual decline.
• 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 National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
• In the past, employment data has been volatile around turning points, but clearly the last eight months of jobs growth suggest an improvement in labour market conditions, despite the likely statistical discrepancies job creation. Hopefully the focus in the latest data will centre on the ongoing lift in employment from a broader perspective than just one month’s data.
• RBA business liaisons have commented on the noticeable lift in business hiring intentions and it suggests labour market conditions are heading in the right direction. Employers are working existing staff harder but as profitability improves, management will feel more comfortable increasing head count.
• Clearly the Reserve Bank has no need to be moving rates in any direction at present.

Why is the data important?

• 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 National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

What are the implications?

• In the past, employment data has been volatile around turning points, but clearly the last eight months of jobs growth suggest an improvement in labour market conditions, despite the likely statistical discrepancies job creation. Hopefully the focus in the latest data will centre on the ongoing lift in employment from a broader perspective than just one month’s data.
• RBA business liaisons have commented on the noticeable lift in business hiring intentions and it suggests labour market conditions are heading in the right direction. Employers are working existing staff harder but as profitability improves, management will feel more comfortable increasing head count.
• Clearly the Reserve Bank has no need to be moving rates in any direction at present.