Employment consolidates after stellar gains

Labour force

• Employment rose by 300 in February after falling by 7,400 in January (previously reported as a 7,900 fall in jobs). Full-time jobs rose by 15,900 while part-time jobs fell by 15,600. Economists had tipped a 13,500 increase in jobs.
• Hours worked fell by 0.1 per cent in February. Hours worked are up 2.2 per cent over the year.
• Jobless rate: The unemployment rate fell from 6.0 to 5.8 per cent in February. The trend unemployment rate held steady at 5.8 per cent – a 26-month low. The participation rate fell from 65.1 per cent to 64.9 per cent.
• Unemployment across states in February: NSW 5.3 per cent (January 5.5 per cent); Victoria 6.0 per cent (6.3 per cent); Queensland 5.6 per cent (6.4 per cent); South Australia 7.7 per cent (6.8 per cent); Western Australia 6.0 per cent (5.9 per cent); Tasmania 7.0 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory held steady at was 4.3 per cent; ACT unemployment also held steady at 4.9 per cent).

What does it all mean?

• The latest employment result was a mixed bag. Flat employment growth, offset by a healthy fall in the unemployment rate, which was largely driven by less people looking for work. Encouragingly the gains were in full-time employment. On the flipside employment consolidated for the third consecutive month – a result that has also seemingly shown up in the modest pullback in the job ads series.
• However there is always volatility in the monthly data and a look at the longer-term data suggests a credible improvement is taking place. A total of 295,900 job seekers found work in 2015 – marking the strongest calendar year result since 2007. And in that context a couple of months of consolidation are not overly concerning. In addition the trend unemployment rate is holding at a 26-month low.
• Labour market conditions have certainly improved over the past year. Business conditions are healthier, 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. Over the past year employers have been working existing staff longer and adding new workers – whether it is part time or full-time roles. There has been a decrease in productivity but that is expected as new employees get settled in new working environments.
• The Reserve Bank won’t be disheartened by the latest job market figures. The RBA looks more closely at longer-run trends. And certainly the Reserve Bank has been surprised at the strength of recent job market indicators. The unemployment rate will continue to bounce around current levels. And given the ongoing improvement in the employment landscape it is more likely the Reserve Bank will focus its energies on other parts of the economy – in particular the recent lift in the Australian dollar. Any further strength in the currency may result in policymakers’ starts the process of “jawboning” – talking down the Aussie dollar. CommSec expects no change to interest rates in coming months.

What do the figures show?

Labour force:

• Employment rose by 300 in February after falling by 7,400 in January (previously reported as a 7,900 fall in jobs). Full-time jobs rose by 15,900 while part-time jobs fell by 15,600. Economists had tipped a 13,500 increase in jobs.
• Hours worked rose by 0.7 per cent in January. Hours worked are up 2.0 per cent over the year
• The unemployment rate fell from 6 per cent to 5.8 per cent.
• The participation rate fell from 65.1 to 64.9 per cent.
• A total of 239,300 jobs were added over the year to February. The annual growth rate was steady at 2.1 per cent. In trend terms, employment has risen for 27 consecutive months.
• The working age population rose by 31,000 in February – matching the strongest gain in 23 months. The working age population rose by 282,700 over the past year. The working age population is up 1.48 per cent over the past year.
• Unemployment across states in February: NSW 5.3 per cent (January 5.5 per cent); Victoria 6.0 per cent (6.3 per cent); Queensland 5.6 per cent (6.4 per cent); South Australia 7.7 per cent (6.8 per cent); Western Australia 6.0 per cent (5.9 per cent); Tasmania 7.0 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory held steady at was 4.3 per cent; ACT unemployment also held steady at 4.9 per cent.
• Jobs across states and territories in February: NSW -3,800; Victoria +30,300; Queensland -5,800; South Australia -2,400; Western Australia -10,100; Tasmania -1,300. Trend terms: Northern Territory-300; ACT +300.

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?

• Interest rates remain on hold. The Reserve Bank will want to assess a lot more data before deciding the next move on rates.
• The Bureau of Statistics has estimated that the number of people in the working age population. Rather than rising by 22,300 a month, the increase in both January and February was 31,000 – the biggest increase in almost two years. If this assumption is correct and retained, it may make it more difficult for the jobless rate to ease in the next few months.