Jobless rate at fresh 3½-year lows

Labour force

• Employment rose by 9,800 in October after falling by 29,000 in September (previously reported as a fall 9,800 jobs). Full-time jobs rose by 41,500 while part-time jobs fell by 31,700. Economists had tipped a 16,000 increase in jobs.
• Hours worked rose by 0.9 per cent in October to record highs – the fastest growth in five months. Hours worked are up by 0.9 per cent on the year.
• Jobless rate: The unemployment rate was steady at 5.6 per cent in October. To two decimal points the jobless rate fell from 5.60 per cent to 5.58 per cent (lowest rate recorded in 3½ years – since February 2013). The trend unemployment rate was steady at 5.6 per cent (hasn’t been lower in 3½ years). The participation rate was steady at 64.4 per cent.
• Unemployment across states in October: NSW 4.9 per cent – a 4 year low (September 4.9 per cent); Victoria 5.7 per cent (5.8 per cent); Queensland 5.8 per cent (6.2 per cent); South Australia 6.4 per cent (6.7 per cent); Western Australia 6.5 per cent (6.1 per cent); Tasmania 6.4 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory fell was steady at 3.5 per cent; ACT unemployment fell from 3.5 per cent to 3.4 per cent.

What does it all mean?

• First, we must always remember that the monthly job figures are backward-looking – the Reserve Bank is more interested in job vacancies and job ads as well as surveys on businesses and the job market. The economy softened mid-year due to Brexit and the Federal Election. And recently there was caution ahead of the US Election. But spending and survey data show that the economy has been lifting in the last few months. And this will lead to more job growth. Job ads rose by 1.0 per cent in October to 4-year highs.
• The big news in the latest month is a big lift in the number of hours worked, in line with more full-time jobs created. And the jobless rate continues to fall to fresh 3½-year lows. More people in jobs and more people confident about their job status mean more spending and borrowing.
• Remember that the Reserve Bank Governor indicated that ‘full employment’ was consistent with a jobless rate near 5 per cent. The national jobless rate is below 5.6 per cent and the NSW jobless rate is 4.9 per cent.
• There remain vast differences across the states. In NSW unemployment is 4.9 per cent – the lowest result in four years, while the ACT has an unemployment rate of 3.4 per cent with the Northern Territory at 3.5 per cent. At the other end of the spectrum, unemployment in South Australia, Tasmania and Western Australia are above 6 per cent with WA having the highest jobless rate in the nation.
• The bottom-line is that there will be no change in interest rates anytime soon. The economy will lift ahead of Christmas and into 2017, underpinned by strong housing markets.

What do the figures show?

Labour force:

• Employment rose by 9,800 in October after falling by 29,000 in September (previously reported as a fall 9,800 jobs). Full-time jobs rose by 41,500 while part-time jobs fell by 31,700. Economists had tipped a 16,000 increase in jobs.
• Hours worked rose by 0.9 per cent in October – fastest in five months. Hours worked are up by 0.9 per cent on the year.
• The unemployment rate was steady at 5.6 per cent in October. To two decimal points the jobless rate fell from 5.60 per cent to 5.58 per cent (lowest rate recorded in 3½ years – since February 2013). The trend unemployment rate was steady at 5.6 per cent (hasn’t been lower in 3½ years). The participation rate was steady at 64.4 per cent.
• A total of 149,800 jobs were added over the year to October. The annual growth rate eased to a 17-month low of 0.9 per cent – a 23-month low. In trend terms, employment fell by 1,000 in October.
• The working age population rose by 24,800 in October. The working age population rose by 290,900 (1.51 per cent) over the last year – fastest growth in 27 months.
• Unemployment across states in October: NSW 4.9 per cent – 4-year lows (September 4.9 per cent); Victoria 5.7 per cent (5.8 per cent); Queensland 5.8 per cent (6.2 per cent); South Australia 6.4 per cent (6.7 per cent); Western Australia 6.5 per cent (6.1 per cent); Tasmania 6.4 per cent (6.6 per cent). In trend terms unemployment in the Northern Territory fell was steady at 3.5 per cent; ACT unemployment fell from 3.5 per cent to 3.4 per cent.
• Jobs across states and territories in October: NSW -5,600; Victoria +20,400; Queensland -16,900; South Australia +3,200; Western Australia +6,800; Tasmania -3,400. Trend terms: Northern Territory +100; ACT unchanged.

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?

• The Australian economy is emerging from a mid-year pause. Looking ahead, there is reason for optimism – just as the Reserve Bank Governor noted this week. A number of hurdles have been cleared like the US election; job ads are rising; home building is at record highs; the Chinese economy continues to record firm growth, as does the US economy.
• Official interest rates are on hold. It is not clear whether the next interest rate move is a rate hike or rate cut – but there looks to be no need to change rates for some time. But borrowers need to be on guard to the risk of higher fixed-term rates after recent increases in global bond yields.