Labour force
- What happened? Employment fell by 30,600 in April after rising by 77,000 in March. The unemployment rate fell from 5.7 per cent to 5.5 per cent.
- Implications: Unemployment continues to fall, boosting job security. So the latest data is positive for companies in the consumer staples and consumer discretionary sectors.
A raft of companies is affected by the employment data but especially those dependent on consumer spending.
What does it all mean?
- The ‘positives’ largely offset the ‘negatives’ in the latest job market release. But monthly volatility or ‘noise’ best represents what was going on in the job market in April. The sharemarket lifted in reaction to the jobs data while the Aussie dollar was a touch higher.
- Employment fell by 30,600 in April but full-time jobs rose by 33,800 with part-time jobs down by 64,400. The jobless rate fell from 5.7 per cent to a 13-month low of 5.5 per cent. And there were 33,600 fewer people classified as unemployed. Encouragingly, the youth unemployment rate decreased 1.1 percentage points to 10.6 per cent. The underemployment rate fell to fresh 7-year lows of 7.8 per cent.
- It is worth reflecting over the past year. Clearly, there have been countless ‘unprecedented’ events associated with the 1-in-100 year pandemic. And the fall in jobs and subsequent recovery over the past year can be filed under this heading. Jobs fell by almost 860,000 over April and May last year. And in the 11 months since, job numbers have rebounded by over 900,000. A stunning result in anyone’s language.
- JobKeeper and JobSeeker have certainly been instrumental in keeping people connected to their employers and allowing them to return to work once restrictions eased or ended. And there has also been a raft of support and stimulus measures to support businesses and workers.
- With the ending of JobKeeper, we now move into a new era. But the evidence to date from indicators like job vacancies is that employers are keen to take on more staff – so much so that there are fears about whether all of the available positions will be filled.
- The job market continues to tighten. And as the process continues that may cause firms to offer higher wages to fill vacant positions. Notably though, unemployment and underemployment are still elevated, meaning there is still plenty of slack in the job market. And the Reserve Bank’s goal of a 4.5 per cent jobless rate is still some way off – and so is a lift in official interest rates. But the speed of the job market recovery means that wage and price growth needs to be watched carefully.
- CBA Group economists expect the jobless rate to keep falling in coming months, reaching 5 per cent by end-2021 and falling to 4.7 per cent by end-2022.
- It will be important for investors to monitor statements and quarterly business updates from listed companies, specifically watching for comments on wage and price pressures and implications for revenue and profit margins. Industries like mining, construction and domestic-directed tourism businesses are particularly vulnerable given strong activity levels.