Jobs bonanza: Quarter of a million jobs added

Labour force; China data; Airfares

• Employment rose for the 11th straight month, up by 54,200 in August after rising by 29,200 in July (previously reported as a rise of 27,900 jobs). Full-time jobs rose by 40,100 while part-time jobs rose by 14,100. Economists had tipped a 15-20,000 increase in jobs.
• Hours worked rose by 0.4 per cent in August and were up by 2.6 per cent over the year. Trend hours worked rose 2.7 per cent over the year, equalling the fastest growth in 6½ years.
• The unemployment rate was steady at 5.6 per cent. The participation rate rose 0.2 percentage points to 65.3 per cent.
• Chinese retail sales rose at a 10.1 per cent annual rate in year to August. The result was below the 10.5 per cent forecast and below the 10.4 per cent growth in the year to July.
• Chinese production: Industrial production rose at a 6.0 per cent annual rate in August, below the forecast average (6.6 per cent) and below the 6.4 per cent growth in the year to July.
• Airfares: In smoothed terms, discount airfares are down by 3.5 per cent on a year ago and stand at 13-month lows. Smoothed business class airfares are up 1.1 per cent over the year to September – the slowest growth rate in over four years.

What does it all mean?

• Over the last six months over a quarter of a million jobs have been created. For a six-month period, you have to go back 17 years to find a stronger result. The economy is clearly gathering momentum. More jobs means more spending. More jobs should lead to more confident consumers. More jobs suggests higher wages down the track.
• Where are the jobs being created? We have to wait another week for the answer. But the infrastructure boom suggests there is good job creation in construction and engineering. And service sector jobs continue to grow, led by health, tourism and education.
• No matter how you cut it, job market trends are encouraging. Reports such as the NAB business survey and ANZ job ads and evidence from Manpower and Engineers Australia point to solid job creation through the remainder of 2017 and into 2018.
• The job market is in good shape and all the leading indicators expect it to stay that way. Hopefully Aussie consumers will start feeling a little more confident about the economy and their finances. It doesn’t help when some in the media believe that the only story on the economy is a bad news story. Wealth is at record highs as are profits, jobs are being created, inflation is contained and interest rates are at record lows. And now add in the fact that a quarter of a million jobs have been created in six months. Consumers say that they aren’t confident but official data shows that spending growth is in line with “normal” levels or longer-term averages. Most other advanced nations would love to tell the same story.
• Stronger employment means more people have money in their pockets, ready to spend. A stronger economy also means higher revenue and profits and clearly that is positive for sharemarket investors and superannuants.
• We may think that the creation of a quarter of a million jobs is fantastic, but in China, 9.74 million jobs were created in the eight months to August – not that far away from the entire 12 million jobs that exist in Australia.

What do the figures show?

• Employment rose for the 11th straight month, up by 54,200 in August after rising by 29,200 in July (previously reported as a rise of 27,900 jobs). Full-time jobs rose by 40,100 while part-time jobs rose by 14,100. Economists had tipped a 15-20,000 increase in jobs.
• Hours worked rose by 0.4 per cent in August and were up by 2.6 per cent over the year. Trend hours worked rose 2.7 per cent over the year, equalling the fastest growth in 6½ years.
• The unemployment rate was steady at 5.6 per cent. The participation rate rose 0.2 percentage points to 65.3 per cent.
• Unemployment across states in August: NSW 5.0 per cent (July 5.0 per cent); Victoria 6.1 per cent (6.1 per cent); Queensland 5.7 per cent (6.2 per cent); South Australia 5.7 per cent (6.2 per cent); Western Australia 5.9 per cent (5.4 per cent); Tasmania 6.0 per cent (6.3 per cent). In trend terms unemployment in the Northern Territory rose from 3.5 per cent to 3.6 per cent; ACT unemployment rose from 4.6 per cent to 4.7 per cent.
• Jobs across states and territories in July: NSW +12,800; Victoria +18,600; Queensland +16,700; South Australia +2,200; Western Australia -100; Tasmania +900. Trend terms: Northern Territory -1,300; ACT +300.
• The working age population rose by 25,300 in August. The working age population rose by 325,500 (1.66 per cent) over the last year, just below the fastest growth in 45 months.
• The underemployment rate fell from 8.8 per cent to 8.6 per cent in the three months to August with the underutilisation rate down from 14.3 per cent to 14.1 per cent

Chinese economic data

• Retail sales rose at a 10.1 per cent annual rate in year to August. The result was below the 10.5 per cent forecast and below the 10.4 per cent growth in the year to July.
• In real terms, spending was up 8.9 per cent on a year ago (up 9.6 per cent in July).
• Annual growth rates were: garments (8.9 per cent); building materials (up 8.8 per cent); furniture (up 11.3 per cent); personal care (up 7.0 per cent); home appliances (up 8.4 per cent); jewellery (up 6.4 per cent); cars (up 7.9 per cent); cosmetics (up 14.7 per cent); communication equipment (up 12.2 per cent); oil (up 4.5 per cent).
• Production rose at a 6.0 per cent annual rate in August, below the forecast average (6.6 per cent) and below the 6.4 per cent growth in the year to July.
• Crude steel production rose by 8.7 per cent in August compared with a year ago. Other changes included: motor vehicles (up 4.7 per cent); communication (up 13.0 per cent); crude oil (down 3.1 per cent); coal (up 4.1 per cent); general equipment (up 10.7 per cent); and natural gas (up 11.7 per cent).
• Urban investment rose by 7.8 per cent in the eight months to August on a year ago (forecast 8.2 per cent) and below the 8.3 growth in the first seven months of 2017. Private fixed asset investment rose by 6.4 per cent in the eight months to August on a year ago. Oil & gas extraction was up by 6.9 per cent while primary industry investment was up 12.2 per cent.
• Fixed asset investment was strongest in Health & social work (up 17.3 per cent), Transportation, warehousing and postal services (up 14.3 per cent); Computer, communications and other electronic equipment manufacturing (up 25.4 per cent); and Water Conservancy, Environment and Public Facilities Management (up 23.6 per cent).
• In terms of jobs, the National Bureau of Statistics said that 9.74 million new urban jobs were created in the eight months to August.

Airfares:

• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) reports that business class airfares rose by 2.8 per cent in September after falling by 2.3 per cent in August. Business class airfares stand 2.0 per cent higher than a year ago. But in smoothed terms, business class airfares are up 1.1 per cent on the year – the slowest growth in four years.
• “Restricted economy” airfares rose by 0.3 per cent in September after rising 1.6 per cent in August. Restricted economy airfares are up 5.8 per cent on a year ago. In smoothed terms ‘restricted economy’ fares were up by 6.1 per cent on a year ago – the strongest growth in two years.
• Discount fares rose by 30.1 per cent in September after falling by 16 per cent in the previous three months. Discount fares are still down by 2.0 per cent over the year. In smoothed terms (13 month moving average), discount fares were down by 3.5 per cent on a year ago – the biggest decline in 17 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. ½
• 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.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases regular aviation data. The BITRE releases 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?

• The job market is in good shape. More importantly the outlook for job creation remains promising. Overall, the strength of the job market provides fundamental support for spending and is good news for retailers.
• The Reserve Bank will be heartened. All is still on track. There is no need to lift or cut rates. The Reserve Bank will be on the rate sidelines for quite a while yet provided inflation stays contained.
• The Chinese statisticians blame hot weather as well as structural adjustments for the slowdown in production growth. Overall the economy appears in good shape but the situation always bears close watching.