Full-time jobs post best quarterly gains in six years

Labour force

• Employment rose by 13,500 in December after rising by 37,100 in November (previously reported as a rise of 39,100 jobs). Full-time jobs rose by 9,300 while part-time jobs rose by 4,200. Economists had tipped a 10,000 increase in jobs.
• Full-time employment lifted by 95,000 in the December quarter – best result since the September quarter 2010. Over the calendar year 2016 a total of 91,500 jobs were added – the weakest result since 2013.
• Hours worked rose by 0.4 per cent in December to be up 0.7 per cent over the year.
• The unemployment rate rose from 5.7 per cent to 5.8 per cent in December.
• Unemployment across states in December: NSW 5.2 per cent (November 4.9 per cent); Victoria 6.0 per cent (6.0 per cent); Queensland 6.2 per cent (6.0 per cent); South Australia 6.8 per cent (7.0 per cent); Western Australia 6.6 per cent (6.9 per cent); Tasmania 6.4 per cent (6.3 per cent). In trend terms unemployment in the Northern Territory was steady at 3.6 per cent; ACT unemployment was steady at 3.7 per cent.

What does it all mean?

• Employment rose by marginally more than forecast with 13,500 new jobs created in December. For the 2016 calendar year a total of 91,500 jobs were added – the weakest result since 2013. From the perspective of the labour market, 2016 could be classified as a mixed year. One that also confused policymakers – with employment growth was soft over the year but the unemployment rate kept sliding, eventually falling to three-year lows. It was clearly a year, where employers were managing their workforce (cost base) very closely due to a subdued economic environment. In effect, the labour market was largely marking time over the majority of 2016 but there are initial signs of a shift coming.
• The modest jobs growth in December, may not sound like much, but couple it with the solid job gains in October and November and it clearly shows a shift in trend. Over the last three months of 2016, more than 67,000 new jobs were created and more importantly all of that was in full-time employment. Full time jobs surged by 95,000 in the December quarter – marking the strongest quarterly growth in more than six years. The shift in the employment landscape is even more evident when you consider that the first nine months of 2016 saw paltry jobs growth of just over 24,000 with full-time jobs going backwards.
• Looking forward, the outlook is certainly more encouraging. Job vacancies are holding near 5-year highs, in addition anecdotal evidence suggest activity levels amongst the business sector is lifting. The strength in commodity prices is also a positive and should support an improvement in employment across the resource states in coming months. It is still early days, but the last three months are certainly more upbeat.
• The Reserve Bank is likely to look through the latest result and wait on timelier forward looking data. Reserve Bank commentary towards the end of 2016, suggests policymakers are relatively optimistic about Australia’s medium-term growth prospects. Over the next few months the Reserve Bank would be looking to see the impact of the lift in commodity prices – on growth as well as inflation. However the key would be a lift in non-mining business investment. CommSec expects interest rates to remain on hold over 2017.

What do the figures show?

Labour force:

• Employment rose by 13,500 in December after rising by 37,100 in November (previously reported as a rise of 39,100 jobs). Full-time jobs rose by 9,300 while part-time jobs rose by 4,200. Economists had tipped a 10,000 increase in jobs.
• Hours worked rose by 0.4 per cent in December. Hours worked are up by 0.7 per cent on the year.
• The unemployment rate rose from 5.7 per cent to 5.8 per cent in December. To two decimal points the jobless rate rose from 5.72 per cent to 5.82 per cent. The trend unemployment rate was steady at 5.7 per cent (hasn’t been lower in 3½ years). The participation rate rose from 64.6 per cent steady at 64.7 per cent.
• Full-time employment lifted by 95,000 in the December quarter – best result since the September quarter 2010.
• A total of 91,500 jobs were added over calendar year 2016 – the weakest result since 2013. The annual growth rate rose from a 25-month low of 0.7 per cent to 0.8 per cent. In trend terms, employment rose by 8,200 in December.
• The working age population rose by 23,700 in December. The working age population rose by 287,200 (1.48 per cent) over the last year – fastest growth in 23 months.
• Unemployment across states in December: NSW 5.2 per cent (November 4.9 per cent); Victoria 6.0 per cent (6.0 per cent); Queensland 6.2 per cent (6.0 per cent); South Australia 6.8 per cent (7.0 per cent); Western Australia 6.6 per cent (6.9 per cent); Tasmania 6.4 per cent (6.3 per cent). In trend terms unemployment in the Northern Territory was steady at 3.6 per cent; ACT unemployment was steady at 3.7 per cent.
• Jobs across states and territories in December: NSW +600; Victoria +13,600; Queensland -13,700; South Australia +500; Western Australia -7,900; Tasmania, unchanged. 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?

• The Australian economy looks to be rebounding after a slow patch in the first nine-months of 2016. Looking ahead, there is reason for optimism. 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. The Reserve Bank is comfortably on the sidelines looking to see how the economy evolves over the early part of 2017. But borrowers need to be on guard to the risk of further higher fixed-term rates if there is a lift in optimism for global growth – particularly if President elect Trump looks at avenues to stimulate the US economy in coming months.