NSW drives the lift in job gains

Labour force; Chinese inflation

• Jobs growth: Employment rose by 7,300 in June after rising by a revised 39,900 in May (previously estimated at a 42,100 rise in jobs). Full-time jobs rose by 24,500 in June while part-time jobs fell by 17,200. In trend terms, employment has risen for 20 consecutive months.
• Jobless rate lifts: The unemployment rate rose from a revised 5.9 per cent (previously 6.0 per cent) in May to 6.0 per cent in June. The participation rate rose from 64.7 per cent to 64.8 per cent.
• Hours worked rose by 0.3 per cent in June to record highs. Hours worked are up 1.2 per cent over the year.
• Jobs across states and territories in June: NSW +11,400; Victoria -5,500; Queensland -1,300; South Australia -5,700; Western Australia +4,200; Tasmania +2,100. Trend terms: Northern Territory +300; ACT +300.
• Tame Chinese inflation: Producer prices fell by 4.8 per cent in the year to June (median forecast: 4.6 per cent decline). Consumer prices were unchanged in June to be up by 1.4 per cent over the year (median forecast: +1.3 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 Queensland and surge in unemployment in Western Australia and South Australia. But the data shows that jobs are being created, more hours are being worked by existing workers, and more people are finding work. 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 particular the strength in employment continues to be driven by NSW. Since the lows in January over 80,000 jobs have been created across the NSW economy – a result that resonates with the ranking in the CommSec State of the States report over the past couple of quarters.
• A look at a longer time frame highlights the encouraging nationwide trend. Over the past eight months over 205,000 jobs have been created across the Australian economy. The unemployment rate looks like it has topped out or very close to peaking – which should help to ease some concerns about job security. An improvement in confidence would certainly bode well for retail activity and broader economic growth.
• In trend terms jobs growth has been taking place for 20 consecutive months. The issue has been that job creation has not been enough to stem the tide of new employees entering the workforce. A healthier economy, improved job prospects, and more importantly a noted lift in job advertisements, have resulted in more people searching for work and finding employment -– a result that should increase household incomes. We could be doing better, but it is OK.
• The mildly better than expected inflation result was largely driven by a rise in vegetable and pork prices. The tame Chinese inflation data will leave the door open for further stimulatory measures. Of more concern in China is if the rout on share markets filters through to the real economy – dampening confidence and crimping demand. The focus now shifts to the GDP or economic growth data for the June quarter which is released next Wednesday.
• There is no rush for the Reserve Bank to move rates in any direction. Policymakers can comfortably wait on the sidelines and let the economy evolve in the low inflation environment. The lower currency and ongoing strength in home building will support activity levels.

What do the figures show?

Labour force:

• Employment rose by 7,300 in June after rising by a revised 39,900 in May (previously estimated at a 42,100 rise in jobs). Full-time jobs rose by 24,500 in June while part-time jobs fell by 17,200. In trend terms jobs rose by 15,200 in June and by 214,900 in the past year.
• The unemployment rate rose from a revised 5.9 per cent (previously 6.0 per cent) in May to 6.0 per cent in June. The participation rate rose from 64.7 per cent to 64.8 per cent.
• Hours worked rose by 0.3 per cent in June to record highs. Hours worked are up 1.2 per cent over the year.
• Unemployment across states: NSW 5.8 per cent (May 5.7 per cent); Victoria 6.0 per cent (6.0 per cent); Queensland 6.1 per cent (6.3 per cent); South Australia 8.2 per cent (7.6 per cent); Western Australia 5.8 per cent (5.1 per cent); Tasmania 6.5 per cent (7.0 per cent). In trend terms unemployment in the Northern Territory was 4.5 per cent (4.5 per cent) while ACT unemployment 4.1 per cent (4.2 per cent).
• >The annual employment growth rate rose from 2.0 per cent to 1.9 per cent in June.
• Jobs across states and territories in June:NSW +11,400; Victoria -5,500; Queensland -1,300; South Australia -5,700; Western Australia +4,200; Tasmania +2,100. Trend terms: Northern Territory +300; ACT +300.

Chinese inflation

• The annual rate of consumer price inflation lifted from 1.2 per cent in May to 1.4 per cent in June (forecast +1.3 per cent). Over the month consumer prices were unchanged after a 0.2 per cent fall in May.
• Food prices fell by 0.1 per cent in June to be up 1.9 per cent compared with a year ago. Non-food prices rose by 0.1 per cent in June and were up 1.2 per cent on a year ago.
• Producer prices (business inflation) fell by 4.8 per cent in June compared with a year ago. Economists had tipped a 4.6 per cent annual decline. Prices rose by 0.4 per cent in June after falling 0.1 per cent in May.

Why is the data important?

• 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 10th 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?

• The lift in hours worked in the past couple of months shows that businesses have got plenty of work to do 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. 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 in coming months.
• The Chinese economy is rebalancing just like Australia’s economy. But with inflation low, policymakers have ample leg-room to add more stimulus to the economy.