Jobless rate nears 4-year lows

Labour force

• Employment rose by 37,400 in April after rising by 60,000 in March (previously reported as a rise of 60,900 jobs). Full-time jobs fell by 11,600 while part-time jobs rose by 49,000. Economists had tipped a 5,000 increase in jobs.
• Hours worked fell by 0.3 per cent in April but were up by 1.3 per cent over the year (strongest annual growth in 11 months).
• The unemployment rate fell from 5.9 per cent to 5.7 per cent (down from 5.86 per cent to 5.71 per cent). The participation rate was steady at 64.8 per cent.
• In trend terms, employment rose by 19,900 in April with unemployment at 5.8 per cent.
• Unemployment across states in April: NSW 4.7 per cent (March 5.0 per cent); Victoria 6.1 per cent (6.1 per cent); Queensland 6.3 per cent (6.3 per cent); South Australia 7.3 per cent (7.0 per cent); Western Australia 5.9 per cent (6.5 per cent); Tasmania 5.9 per cent (6.0 per cent). In trend terms unemployment in the Northern Territory was steady at 3.5 per cent; ACT unemployment fell from 3.7 per cent to 3.6 per cent.
• State/territory jobs: In seasonally adjusted terms, the largest increase in employment was in Victoria (up 18,600 persons), followed by Western Australia (13,200 persons), Queensland (9,800 persons) and New South Wales (up 9,700 persons). The only decrease in employment was in South Australia (down 5,000 persons).

What does it all mean?

• At face value the March jobs data was ‘one out of the box’ – an outlier if you like. But the gain of 60,000 jobs was backed up by additional job gains of more than 37,000 in April. Now clearly it is no fluke. In fact jobs have lifted for the past seven months, averaging gains of around 25,000 a month. Unemployment is falling and hours worked are up 1.3 per cent over the year – the best annual growth in 11 months. The forward indicators like job ads and business surveys had been pointing to a stronger job market and indeed it does now appear to be reality.
• Employment is a lagging indicator – it reflects business decisions made 5-6 months ago. In late 2016/early in 2017, economic conditions were indeed picking up, causing more businesses to take on staff. The hiring process means that the applicants are now be taking up new positions. And with job vacancies and job ads both rising, further gains in jobs can be expected in coming months with a lower jobless rate.
• Interest rates are set to remain on hold for an extended period. While the job market is improving and justifying Government and Reserve Bank forecasts, it will take some time for the stronger results to be reflected in higher wages and stronger consumer spending. But clearly the latest data is encouraging.
• NSW is arguably at full employment. And just as higher Sydney home prices are lifting home prices elsewhere in the nation, the hope is that NSW wages can start lifting with the gains extending across the land. The NSW jobless rate is the lowest in nearly five years (August 2012).

What do the figures show?

• Employment rose by 37,400 in April after rising by 60,000 in March (previously reported as a rise of 60,900 jobs). Full-time jobs fell by 11,600 while part-time jobs rose by 49,000. Economists had tipped a 5,000 increase in jobs.
• Hours worked fell by 0.3 per cent in April but were up by 1.3 per cent over the year (strongest annual growth in 11 months).
• The unemployment rate fell from 5.9 per cent to 5.7 per cent. The participation rate was steady at 64.8 per cent.
• In trend terms, employment rose by 19,900 in April with unemployment at 5.8 per cent.
• Unemployment across states in April: NSW 4.7 per cent (March 5.0 per cent); Victoria 6.1 per cent (6.1 per cent); Queensland 6.3 per cent (6.3 per cent); South Australia 7.3 per cent (7.0 per cent); Western Australia 5.9 per cent (6.5 per cent); Tasmania 5.9 per cent (6.0 per cent). In trend terms unemployment in the Northern Territory was steady at 3.5 per cent; ACT unemployment fell from 3.7 per cent to 3.6 per cent.
• Jobs across states and territories in April: NSW +9,700; Victoria +18,600; Queensland +9,800; South Australia -5,000; Western Australia +13,200; Tasmania +1,000. Trend terms: Northern Territory +600; ACT -100.
• The working age population rose by 23,000 in April. The working age population rose by 310,300 (1.59 per cent) over the last year – the fastest growth in 43 months.

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 Reserve Bank now looks at the jobless rate, employment, under-employment rate and hours worked to determine the state of the job market. All the latest figures are encouraging. The jobs data is clearly a setback to the pessimists. But the strength is entirely understandable to those who have been watching the leading indicators – especially with business conditions at 9-year highs.
• Interest rates are solidly on hold. The jobs data is positive for consumer-focussed companies.