Jobless rate falls to 2½-year low

Labour force; Domestic Airfares

• Employment rose by 26,100 in March after rising by 700 in February (previously reported as a rise in jobs of 300). Full-time jobs fell by 8,800 while part-time jobs rose by 34,900. Economists had tipped a 17,000 increase in jobs.
• Hours worked fell by 1.1 per cent in March. Hours worked are up by 0.7 per cent over the year.
• Jobless rate: The unemployment rate fell from 5.8 per cent to a 2½-year low of 5.7 per cent in March (lowest since September 2013). The trend unemployment rate held steady at 5.8 per cent – a 27-month low. The participation rate was steady at 64.9 per cent.
• Unemployment across states in March: NSW 5.3 per cent (February 5.3 per cent); Victoria 5.7 per cent (6.0 per cent); Queensland 6.1 per cent (5.6 per cent); South Australia 7.2 per cent (7.7 per cent); Western Australia 5.5 per cent (6.0 per cent); Tasmania 6.8 per cent (6.9 per cent). In trend terms unemployment in the Northern Territory rose from 4.4 per cent to 4.5 per cent; ACT unemployment fell from 4.5 per cent to 4.3 per cent.
  ¾ In smoothed terms, discount fares fell by 3.6 per cent over the year to April. But business class airfares rose at a smoothed 7.4 per cent annual rate with “restricted economy” fares up by 3.6 per cent

What does it all mean?

• The latest employment result was just what households and businesses ordered. After a couple of months of consolidation, employment has recorded a sizeable rebound. And while the pessimists may focus on the fact that hours worked fell in the March, the slide in the unemployment rate to 5.7 per cent – the lowest levels in 2½ years – will provide a big boost to confidence amongst Aussie consumers. And as we saw over the latter part of 2015, job security plays a big part in household consumption.
• 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.
• After racking up almost 300,000 new jobs in 2015, there was likely to be inevitable period of consolidation. And the volatility in financial markets in the early part of 2016 was unlikely to see businesses commit to significant hiring. The employment growth in March is a positive shift in momentum, however while we expect employment to strengthen over 2016, it is likely that employers will be more circumspect in hiring given the uncertainty around the timing of the Federal Election.
• The Reserve Bank will be comforted by the latest job market figures. No doubt it would like to see a lift in productivity but that will take time as the significant new job hires over 2015 get settled into their new working environments. In addition policymakers will take the latest figures with a degree of caution given the seasonality issues with the early timing of Easter and even the extra day in February (leap year). The key will be the inflation data, due on April 27. A super low inflation result would allow the Reserve Bank to contemplate another rate cut – in effect asking the question whether the economy could run at a faster pace without creating asset bubbles. We expect rates to remain on hold over the next couple of months.
• The Reserve Bank will also be heartened that the youth jobless rate (15-24 year olds) fell from 12.2 per cent to a near 3-year low of 12 per cent.
• It pays to shop around. That is common advice but it certainly is the case with airfares. In smoothed terms, discount airfares are almost 4 per cent lower than a year ago but business and full fare economy fares are up on a year ago – over 7 per cent higher in the case of business fares. With plenty of people travelling – especially businesspeople – airlines aren’t keen to trim fares.

What do the figures show?

Labour force:

• Employment rose by 26,100 in March after rising by 700 in February (previously reported as a rise in jobs of 300). Full-time jobs fell by 8,800 while part-time jobs rose by 34,900. Economists had tipped a 17,000 increase in jobs.
• Hours worked fell by 1.1 per cent in March. Hours worked are up by 0.7 per cent over the year.
• The unemployment rate fell from 5.8 per cent to a 2½-year low of 5.7 per cent in March (lowest since September 2013). The trend unemployment rate held steady at 5.8 per cent – a 27-month low.
• The participation rate was steady at 64.9 per cent.
• A total of 235,300 jobs were added over the year to March. The annual growth rate eased from 2.1 per cent to 2 per cent. In trend terms, employment has risen for 28 consecutive months.
• The working age population rose by 30,900 in March. The working age population rose by 285,600 over the past year. The working age population is up 1.49 per cent over the past year.
• Unemployment across states in March: NSW 5.3 per cent (February 5.3 per cent); Victoria 5.7 per cent (6.0 per cent); Queensland 6.1 per cent (5.6 per cent); South Australia 7.2 per cent (7.7 per cent); Western Australia 5.5 per cent (6.0 per cent); Tasmania 6.8 per cent (6.9 per cent). In trend terms unemployment in the Northern Territory rose from 4.4 per cent to 4.5 per cent; ACT unemployment fell from 4.5 per cent to 4.3 per cent.
• Jobs across states and territories in March: NSW +4,800; Victoria +10,600; Queensland -15,400; South Australia +4,600; Western Australia +16,600; Tasmania +800. Trend terms: Northern Territory -600; ACT unchanged.

Airfares

• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) reports that business class airfares fell by 0.2 per cent in April to stand 6.2 per cent higher than a year ago. Earlier in February airfares were up 8.2 per cent on a year ago – the strongest growth in 10 months. In smoothed terms, business class airfares are up 7.4 per cent on the year, the fastest growth pace in 13 months.
• “Restricted economy” airfares also fell by 0.2 per cent in April after rising by 0.1 per cent in March. Restricted economy airfares are up 3.6 per cent on a year ago. In smoothed terms restricted economy fares were also up 3.6 per cent over the year. Airfares have been rising at a 6.5 per cent average annual pace for the past three years.
• Discount airfares remain volatile. Discount fares rose by 6.4 per cent in April after falling by 6.6 per cent in March and rising by 7.5 per cent in February. Discount fares are 9.9 per cent higher than a year ago after being down 13 per cent on a year ago in March. In smoothed terms, discount airfares are down 3.6 per cent on a year ago.
• In real terms however, discount airfares are only 6.0 per cent above the lowest levels recorded (March 2011).

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.
• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases regular aviation data. The BITRE releases Airport Traffic data and the Australian Domestic Airline Activity publication each month as well as the Domestic Air Fares publication. The data provides insights on airline activity as well as trends in the broader Australian economy. If more people are flying, then it suggests businesses are more active and/or consumers are more confident.

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 the past three months averaged almost 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 further in the next few months.