Hours worked lifts at the fastest pace in four years

Labour force

• Jobs losses: Employment fell by 2,900 in April after rising by a revised 48,200 in March (previously estimated at a 37,700 gain in jobs). Full-time jobs fell by 21,900 in April while part-time jobs rose by 19,000.
• A total of over 161,000 job seekers found work over the past six months – the best result in four years for an equivalent period.
• Jobless rate eases: The unemployment rate rose from 6.1 per cent to 6.2 per cent in April. The participation rate held steady at 64.8 per cent.
• Hours worked rose by 1.1 per cent in April to record highs. Hours worked are up 3.3 per cent over the year – the fastest pace of growth in 4-years.
• Jobs across states and territories in April: NSW +9,800; Victoria -4,900; Queensland +5,200; South Australia -500; Western Australia -10,400; Tasmania -1,000. Trend terms: Northern Territory +900; ACT +200.

What does it all mean?

• At face value employment consolidated in April after strong growth in March. However delve in a little deeper and there were some clear encouraging signs for the employment landscape. Not only was the super strong March result revised to show an additional 10,500 jobs created, but hour worked also lifted by over 1 per cent in April to record highs.
• There is always volatility in the monthly data but a look at the longer-term data suggests a credible improvement is taking place. A total of 161,000 job seekers have now found work over the past six months – the best result in four years for an equivalent period. There may be some level of statistical discrepancy. But it does resonate with the lift in the employment landscape conditions over the past six months.
• Over the past year employers have been working existing staff longer and there had been a lift in productivity, in addition it is clear that employers are adding to the workforce – whether it is part time or full-time roles. A healthier economy, improved job prospects, and more importantly a noted lift in job advertisement have resulted in more people searching for work, and finding employment -– a result that should increase household incomes. An added bonus is that hours worked continues to lift, now up 3.3 per cent on a year ago.
• Labour market conditions have certainly improved in recent months. Business conditions are ok, profitability has improved and more importantly the housing sector is providing significant support to an array of industries. No doubt the business sector is feeling more comfortable hiring as can be seen by the healthy lift in job advertisements.
• The unemployment rate will continue to bounce around current levels. And the latest lift is unlikely to overly concern the Reserve Bank. The decision to cut interest rates earlier this week should support business investment plans and in turn hiring over the latter part of 2015. The one concern is the recent Aussie dollar strength. And given no forward guidance on interest rate following the rate cut it seem likely that the Reserve Bank is hoping the US Federal Reserve does some of the heavy lifting in pushing down the Aussie dollar. CommSec expects no change to interest rates in coming months.

What do the figures show?

Labour force:

• Employment fell by 2,900 in April after rising by a revised 48,200 in March (previously estimated at a 37,700 gain in jobs). Full-time jobs fell by 21,900 in April while part-time jobs rose by 19,000. In trend terms jobs rose by 23,000 in April and by 188,400 in the past year.
• The unemployment rate rose from 6.1 per cent to 6.2 per cent in April. The participation rate held steady at 64.8 per cent. In trend terms the jobless rate is 6.1 per cent and participation rate 64.8 per cent.
• Hours worked rose by 1.1per cent in April to record highs. Hours worked are up 3.3 per cent over the year.
• Unemployment across states: NSW 5.9 per cent (March 6.0 per cent); Victoria 6.2 per cent (6.2 per cent); Queensland 6.6 per cent (6.7 per cent); South Australia 6.4 per cent (7.1 per cent); Western Australia 5.5 per cent (5.7 per cent); Tasmania 6.6 per cent (7.3 per cent). In trend terms unemployment in the Northern Territory was 4.4 per cent (4.5 per cent) while ACT unemployment was 4.4 per cent (4.3 per cent).
• The annual employment growth rate eased from 1.6 per cent to 1.5 per cent in April.
• Jobs across states and territories in April: NSW +9,800; Victoria -4,900; Queensland +5,200; South Australia -500; Western Australia -10,400; Tasmania -1,000. Trend terms: Northern Territory +900; ACT +200.

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?

• There is no question that the economy went through a lull period last year but it has since lifted. And it is pretty clear that the transition in activity from mining to housing construction has been a case of so far so good, and more importantly housing construction will support a further lift in employment.
• The sharp lift in hours worked in the past couple of months shows that businesses have got plenty of work to do Leading indicators like job ads point to a better job market over the rest 2015. But a further improvement in the job market will require more confident employers.
• The Reserve Bank is likely to sit comfortably on the interest rate sidelines following the recent rate cut.