Good, but not great jobs data

Labour force

• Jobs rise: Employment rose by 15,600 in February after falling by 14,600 in January (previously estimated at 12,200 drop in jobs). Full-time jobs rose by 10,300 in February while part-time jobs rose by 5,300.
• Jobless rate eases: The unemployment rate eased from 6.4 per cent to 6.3 per cent in February. (To two decimal places, the jobless rate fell from 6.38 per cent to 6.25 per cent). The participation rate eased from 64.7 per cent to 64.6 per cent.
• Hours worked rose by 0.8 per cent in February to record highs after rising by 0.7 per cent in January – the best back-to-back result in 13 months. Hours worked are up 1.8 per cent over the year.
• Unemployment across states: NSW 6.3 per cent (January 6.3 per cent); Victoria 6.0 per cent (6.6 per cent); Queensland 6.7 per cent (6.5 per cent); South Australia 6.9 per cent (7.2 per cent); Western Australia 5.8 per cent (5.6 per cent); Tasmania 6.6 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory was 4.3 per cent (4.1 per cent) while ACT unemployment fell from 4.6 per cent to 4.5 per cent.

What does it all mean?

• Overall, this is an encouraging result. As always there is volatility in the seasonally adjusted data – notably the drop in unemployment in Victoria and the fall in the workforce participation rate. But the data shows that jobs are being created, more hours are being worked by existing workers, and more people are finding work. The unemployment rate looks like it is topping out between 6.0-6.5 per cent, but much will depend on businesses and consumers gaining confidence and starting to spend more freely in coming months.
• At present it appears that businesses have enough work to go on with but are working existing staff a little more intensively before going down the route of taking on more staff.
• In trend terms, jobs rose by 14,000 in February and the participation rate was unchanged. That is OK. A little stronger growth in the economy would lift job growth and cut the jobless rate. We could be doing better, but it is OK. In fact the jobless rate wasn’t too far away from being recorded at 6.2 per cent in February rather than 6.3 per cent.
• Each Reserve Bank meeting is a “live” meeting – in other words, a rate cut will be discussed in April and May and so on. But there is no rush. The Reserve Bank can wait until the inflation data is released in late April and then look more closely at the need to cut rates at the May Board meeting.

What do the figures show?

Labour force:

• Employment rose by 15,600 in February after falling by 14,600 in January (previously estimated at a 12,200 drop in jobs). Full-time jobs rose by 10,300 in February while part-time jobs rose by 5,300. In trend terms jobs rose by 14,000 in February and by 151,500 in the past year, down from a 41-month high of 153,700 in January.
• The unemployment rate fell from 6.4 per cent to 6.3 per cent in February. The participation rate fell from 64.7 per cent to 64.6 per cent. In trend terms the jobless rate is 6.3 per cent and participation rate 64.7 per cent.
• Hours worked rose by 0.8 per cent in February to record highs after rising by 0.7 per cent in January. Hours worked are up 1.8 per cent over the year.
• Unemployment across states: NSW 6.3 per cent (January 6.3 per cent); Victoria 6.0 per cent (6.6 per cent); Queensland 6.7 per cent (6.5 per cent); South Australia 6.9 per cent (7.2 per cent); Western Australia 5.8 per cent (5.6 per cent); Tasmania 6.6 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory was 4.3 per cent (4.1 per cent) while ACT unemployment fell from 4.6 per cent to 4.5 per cent.
• The annual employment growth rate eased from a 43-month high of 1.9 per cent in December to 1.5 per cent in January and to 1.3 per cent in February.
• Jobs across states and territories in February: NSW +700; Victoria +12,800; Queensland +8,100; South Australia -7,300; Western Australia +3,300; Tasmania -1,100. Trend terms: Northern Territory +700; ACT +100.
• According to the ABS the working age population grew by 33,400 in both January and February – the biggest gains in six years. So the hurdle rate to reduce the jobless rate has lifted. The working age population has grown by 320,300 over the past year.
• 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.
• We expect another rate cut in the next few months, but favour May over April.
• Leading indicators like job ads point to a better job market over 2015. But a solid improvement in the job market will require more confident employers.
• The sharp lift in hours worked in the past two months shows that businesses have got plenty of work to do, but at present they prefer to work existing staff more intensively rather than take on new staff.

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.

What are the implications?

• We expect another rate cut in the next few months, but favour May over April.
• Leading indicators like job ads point to a better job market over 2015. But a solid improvement in the job market will require more confident employers.
• The sharp lift in hours worked in the past two months shows that businesses have got plenty of work to do, but at present they prefer to work existing staff more intensively rather than take on new staff.