• 

  Employment growth surpassed optimistic expectations.

  Jobs gains: Employment rose by a record high 121,000 in August after falling by a revised 4,100 in July (previously reported as a 300 fall in jobs). Full-time jobs rose by 14,300 in August after rising by 15,400 in July. Part-time jobs rose by 106,700 in August after falling by 4,100 in July.

• A total of 236,500 new jobs have been created in the first eight months of 2014 – the best start to a calendar year since 2005.
• Jobless rate slides: The unemployment rate fell from 6.4 per cent to 6.1 per cent in August. The participation rate rose from 64.9 per cent to 65.2 per cent.
• Hours worked was unchanged in August after falling by 1.0 per cent in July. Hours worked are up 0.6 per cent over the year.
• Tame Chinese inflation: Producer prices fell by 1.2 per cent in the year to August (median forecast was for a 1.1 per cent decline). Consumer prices rose by 2.0 per cent over the year (median forecast 2.2 per cent).
• In August, consumer prices rose by 0.2 per cent. Producer prices fell by 0.2 per cent.

What does it all mean?

• Employment growth surpassed even our rather optimistic expectations. Part time jobs growth of over 106,000 jobs or a record total (part time plus full-time) 121,000 jobs in one month? Well it is hard to take this at face value, and no doubt there is some level of statistical discrepancy. But it does resonate with the lift in the employment landscape conditions over the past year. And more importantly rather than focusing on one month’s data the broader trend shows a similar picture.
• Last year employers were working existing staff longer and there had been a lift in productivity, while it is now clear that employers are adding to the workforce – whether it is part time or full-time roles. In fact jobs growth has been solid with almost 127,000 full-time jobs having been created in the first eight months of 2014 – marking the best start to a calendar year in four years.
• The one key positive out of the super-strong result is that it should ease concerns about the labour market. All the noise about the prior result – 12–year high unemployment rate in July- dampened consumer confidence. However this time round despite the lift in the participation rate – which suggests more people are looking for work – the unemployment rate eased back to 6.1 per cent. The latest result should help to ease some of those concerns. An improvement in confidence would certainly bode well for retail activity and broader economic growth.
• Labour market conditions have certainly improved in recent months. Business conditions are healthy, profitability has improved and more importantly forward order books are starting to fill up. No doubt the business sector is feeling more comfortable hiring as can be seen by the ongoing lift in job advertisements. More people are looking for work and more people are finding work as well – a result that should increase household incomes.
• The Reserve Bank would certainly be feeling a bit more comfortable. It’s all running pretty much to plan. Even the recent US dollar strength has resulted in the Aussie dollar falling to a six-month low. Clearly the Reserve Bank has no need to be moving rates in any direction at present. The earliest timing of the first rate hike is February next year, but it requires a further improvement in activity levels and a stronger lift in employment.
• Chinese inflation remains benign and is certainly no threat to the broader Chinese economy. Consumer inflation is healthy without being excessive and business inflation is still contracting. More importantly the data in recent weeks suggests the Chinese economy has found a solid base and has lifted after a lacklustre start to the year. If growth doesn’t rebound Chinese authorities are certainly well placed to provide further stimulus.Focus will shift to the retail sales, industrial production and fixed asset investment figures due out on Saturday.

What do the figures show?

Labour force:

• Employment rose by a record high 121,000 in August after falling by a revised 4,100 in July (previously reported as a 300 fall in jobs). Full-time jobs rose by 14,300 in August after rising by 15,400 in July. Part-time jobs rose by 106,700 in August after falling by 4,100 in July.
• The unemployment rate fell from 6.4 per cent to 6.1 per cent in August. The participation rate rose from 64.9 per cent to 65.2 per cent.
• The number of hours worked was unchanged in August after falling by 1.0 per cent in July. Hours worked are up 0.6 per cent over the year.
• The annual employment growth rate rose from 0.9 per cent to 2.2 per cent in August. The working age population grew by 26,100 people in August and by 3441,700 over the year or 1.82 per cent.
• Unemployment across states and territories: NSW 5.7 per cent (July 5.9 per cent); Victoria 6.8 per cent (7.0 per cent); Queensland 6.7 per cent (6.8 per cent); South Australia 5.9 per cent (7.2 per cent); Western Australia 5.0 per cent (5.2 per cent); Tasmania 7.1 per cent (7.6 per cent). Trend unemployment Northern Territory 4.8 per cent (4.6 per cent); ACT 4.6 per cent (4.3 per cent).
• Jobs across states and territories: NSW +45,300; Victoria +26,100; Queensland +26,500; South Australia +16,800; Western Australia +9,600; Tasmania +3,800. Trend employment Northern Territory +200; ACT +700.

Chinese inflation data

• The annual rate of consumer price inflation fell from 2.3 per cent in July to 2.0 per cent in August. The result was below forecasts for annual growth of 2.2 per cent. Over the month consumer prices rose by 0.2 per cent, mildly weaker than forecasts.
• Food prices rose by 0.7 per cent in August after falling by 0.1 per cent in July with non-food prices down 0.1 per cent in August. Pork prices lifted by a much more sedate 0.1 per cent in August. Over the year to August, food prices rose by 3 per cent while non-food prices were up by 1.5 per cent.
• Annual price growth: Clothing prices rose by 2.6 per cent in the year to August; tobacco & liquor prices fell 0.6 per cent annually; transport & communications rose 0.2 per cent annually; household equipment & maintenance prices were up 1.1 per cent annually; healthcare & personal products rose by 1.4 per cent annually; entertainment & educational rose 1.9 per cent annually.
• Producer prices (business inflation) fell by 0.2 per cent in August. Producer prices in August were 1.2 per cent lower than a year ago. Economists had tipped a 1.1 per cent annual decline.
• 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.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th 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 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
• In the past, employment data has been volatile around turning points, but clearly the last eight months of jobs growth suggest an improvement in labour market conditions, despite the likely statistical discrepancies job creation. Hopefully the focus in the latest data will centre on the ongoing lift in employment from a broader perspective than just one month’s data.
• RBA business liaisons have commented on the noticeable lift in business hiring intentions and it suggests labour market conditions are heading in the right direction. Employers are working existing staff harder but as profitability improves, management will feel more comfortable increasing head count.
• Clearly the Reserve Bank has no need to be moving rates in any direction at present.

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.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th 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 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

What are the implications?

• In the past, employment data has been volatile around turning points, but clearly the last eight months of jobs growth suggest an improvement in labour market conditions, despite the likely statistical discrepancies job creation. Hopefully the focus in the latest data will centre on the ongoing lift in employment from a broader perspective than just one month’s data.
• RBA business liaisons have commented on the noticeable lift in business hiring intentions and it suggests labour market conditions are heading in the right direction. Employers are working existing staff harder but as profitability improves, management will feel more comfortable increasing head count.
• Clearly the Reserve Bank has no need to be moving rates in any direction at present.

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Labour force

• 

  Jobs market on track

  Jobs fall slightly, but full-time employment lifts again: Employment fell by 4,800 in May after rising by a revised 10,300 in April (previously reported as a 14,200 increase in jobs). Full-time jobs rose by 22,200 in May after rising by 13,800 in April. Part-time jobs fell by 27,000 in May after falling by 3,600 in April.

• A total of 101,200 new full-time jobs have been created in the first five months of 2014 – marking the best start to a calendar year in seven years.
• Jobless rate holds steady: The unemployment rate held steady at 5.8 per cent in May. The participation rate fell from 64.7 per cent to 64.6 per cent.
• Hours worked rose: The number of hours worked rose by 1.7 per cent in May after falling by 2.2 per cent in April. Hours worked are up 1.2 per cent over the year.
• Unemployment across states and territories: NSW 5.7 per cent (5.4 per cent in April); Victoria 6.2 per cent (6.4 per cent); Queensland 6.2 per cent (6.3 per cent); South Australia 6.8 per cent (6.2 per cent); Western Australia 5.0 per cent (4.9 per cent); Tasmania 7.5 per cent (7.6 per cent); Northern Territory, trend 3.3 per cent (3.5 per cent); ACT, trend 3.7 per cent (3.7 per cent).
• Employment by state: The ABS notes: “The largest absolute decreases in seasonally adjusted employment were in New South Wales (down 22,200 persons) and South Australia (down 4,500 persons). The largest absolute increases in seasonally adjusted employment were in Victoria (up 19,500 persons) and Western Australia (up 6,800 persons).

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Labour force

• 

  Unemployment rate is up.

  Jobs down: Employment fell by 3,700 in January after a revised 23,000 loss in jobs in December (previously reported as a 22,600 decrease in jobs). Full-time jobs fell by 7,100 in January and part-time jobs rose by 3,400.

• Jobless rate lifts: The unemployment rate rose from 5.8 per cent to 6.0 per cent in January. (Actually the rise was only from 5.85 per cent to 5.98 per cent). The participation rate eased held steady at 64.5 per cent.
• Hours worked lifts to a record high. The number of hours worked rose by 1.3 per cent in January after rising by 0.2 per cent in December. Hours worked are up 2.0 per cent over the year.
• Unemployment across states and territories: NSW 5.8 per cent (5.8 per cent in December); Victoria 6.4 per cent (6.2 per cent); Queensland 6.1 per cent (5.9 per cent); South Australia 6.6 per cent (6.8 per cent); Western Australia 5.1 per cent (4.6 per cent); Tasmania 7.6 per cent (7.6 per cent); Northern Territory 4.0 per cent (4.3 per cent); ACT 3.8 per cent (3.9 per cent).
• As a result of changes to population benchmarks, the Labour Force is smaller than previously estimated, down by just over 176,000 with employment revised down by 166,000. In December there were 11.463 million people employed, down from the earlier estimate of 11.629 million.

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Labour force

• Jobs down: Employment fell by 22,600 in December after a revised 10,500 gain in jobs in November (previously reported as a 21,000 increase in jobs). Full-time jobs fell by 31,600 in December and part-time jobs rose by 9,000.
• In the 2013 calendar year just 54,600 jobs were created, marking the weakest result for a calendar year since 1996. Part time employment lifted by almost 122,100 workers over 2013 compared with 67,500 full-time jobs lost.
• Jobless rate edges higher: The unemployment rate edged up from by less than 0.1 per cent 5.8 per cent in December. (Actually the rise was only from 5.77 per cent to 5.85 per cent). The participation rate eased from 64.8 per cent to 64.6 per cent.
• Hours worked. The number of hours worked was unchanged in December after falling by 0.7 per cent in November. Hours worked are up 0.3 per cent over the year.
• Unemployment across states and territories: NSW 5.8 per cent (5.9 per cent in November); Victoria 6.2 per cent (6.2 per cent); Queensland 5.9 per cent (5.7 per cent); South Australia 6.7 per cent (6.8 per cent); Western Australia 4.7 per cent (4.3 per cent); Tasmania 7.7 per cent (7.7 per cent); Northern Territory 4.2 per cent (4.4 per cent); ACT 4.0 per cent (4.1 per cent).

What does it all mean?

Jobs growth sluggish for 2013.

First and foremost it should be said that the unemployment figures are largely backward looking, highlighting the sluggishness in the broader economy in the lead up to and just after the election last year. More timely figures on consumer and business confidence, retail sales, lending finance and housing activity have been more upbeat suggesting that activity levels have firmed over recent weeks.

There is no doubt that over most of 2013 trading conditions were tough for businesses and as a result employers were not keen to take on additional staff. The pickup in in consumer and business confidence is translating into more activity. The $64 question is how quickly does this turnaround the labour market?

While employers are not out there significantly firing workers they are not adding to the workforce. Rather businesses have been in a holding pattern, awaiting an improvement in conditions and managing staff hours. A broader view of the labour market data shows that businesses are still more inclined to hire part-time workers and contract staff than take on full-time staff. Part time employment lifted by almost 122,100 workers over 2013 compared with 67,500 full-time jobs lost. In fact Full time job losses have occurred in ten out of the 12 months in 2013. The people getting jobs probably prefer full-time work to part-time work, and the loss in income has had an indirect hit on discretionary retail spending.

Interestingly hours worked has lifted by just 0.3 per cent over the past year. Employers may be getting part time jobs but certainly not working the hours they would like

The pickup in consumer and business confidence has started to translate into more activity. And in turn it will take a few more months to translate to improve business profitability and result in a lift in hiring. The latest results are more of a snapshot on how the economy looked 4-5 months ago. Clearly it takes time to take on new staff, from the start of the interviewing process to when the new starters finally commence work. But given the fact that the economy is crawling off a low base while also trying to adjust to the structural imbalances from the pullback in mining investment, it is likely the jobless rate will probably edge towards 6.0 per cent over the next few months.

While the Reserve Bank would be disappointed and concerned with the sluggishness in the labour market, policymakers would have to be pleased at the way the overall economic recovery is panning out. The housing recovery continues to gather momentum, while rising wealth levels is supporting confidence and in turn spending. In addition the lower Australian dollar should provide a boost to exports in coming months and help to alleviate the risks surrounding the rebalancing of the economy. The key area of concern is likely to be how quickly the labour market recovers. As such we expect the Reserve Bank to maintain an easing bias over the next few months, but further rate cuts are unlikely to be required. Cash rates have probably bottomed.

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• Employment rose by 24,000 people in January, slightly above forecasts centred on gains of around 15,000 (range from -11,000 to +35,000 jobs). The December result was revised lower to show growth of 1,800 people (previously +2,300). Full-time employment fell by 8,000 in January (December jobs were up by 200) and part-time jobs rose by 32,000 (December jobs rose by 1,600).
• The unemployment rate was unchanged at 5.0 per cent. The participation rate rose from 65.8 per cent to 65.9 per cent. The working age population rose by 19,000.
• Average hours worked fell by 0.8 per cent in December but rose by 2.6 per cent over the year.
• While the overall jobless rate is hovering near 5.0 per cent, the youth jobless rate is stuck above 16 per cent and showing no signs of improvement. In fact employment for the 15-19yrs age group fell by 100 over the past year.
• Employment rose most in Victoria (up 17,800) followed by Western Australia (up 3,200), Tasmania (up 600), ACT (up 500), NSW (up 100). Employment fell 5,100 in Queensland followed by South Australia (down 400) and Northern Territory (down 300).

What does it all mean?

• While the overall performance of the job market has been solid over the past year, the question is whether we are failing our young people. The jobless rate for the 15-19 year age group stood at 17.8 per cent in original terms in January – the highest January reading in eight years. Even for the wider grouping of 15-24 years, the jobless rate was 12.8 per cent in January – the highest January reading in seven years.
• While the seasonally adjusted measure of the youth jobless rate has eased from a high of 17.9 per cent, it appears stuck above 16 per cent and showing no sign of falling in line with the economy-wide unemployment measure
• The Government needs to ensure that our younger workers aren’t being left behind, otherwise that will set up problems in the future. Around one in seven young people are unemployed. If they young unemployed are unsuited for higher education, then every attempt needs to be made to provide them with workplace or vocational training to ensure they can meaningfully contribute to economy over time.

• It’s clear that the job market is as variable as the weather. And of course the weather also had a significant influence on the January jobs figures as well. But reading between the lines it is clear that the soft readings on economic activity are now being reflected in the job market figures. Businesses seem to prefer part-time workers to full-time staff while also cutting back the number of hours of their existing employees. Overall the job market is in reasonable shape, but it is now going sideways. Certainly today’s result accords with the views of the Reserve Bank that the job market isn’t overly tight at present.
• The top line employment result suggests employment remains robust. But delve a little deeper and the latest employment figures loses some of its lustre. Full time employment tracked backwards, after a sedate reading in the prior month. And full-time hours worked slumped by 0.7 per cent. The results are consistent with CommSec’s view that the economy is softer than many believe.
• The economy has softened in the last couple of months. Manufacturing, construction and the services sector are all contracting, while businesses are trimming new orders and profitability is being affected – given the lack of activity. No doubt the softer economy is ensuring that businesses remain cautious and the gains in part time employment adds further weight to that picture. Overall it is unlikely that the Reserve Bank will be pursuing further interest rate rises anytime soon. CommSec expects the next rate hike to be towards midyear.
• The Reserve Bank is also anticipating a softening of conditions in the labour market going forward – in line with the weak growth forecasts for the first half of 2011. In fact the Reserve Bank expects the unemployment rate to only slide by 0.5 per cent over the coming two years. No doubt in the longer term an improvement in productivity is what is needed to ensure that these forecasts are met.
• Even the slide in the growth rate of the working age population is concerning. The working age population grew by 1.93 per cent over the past year – the smallest gain in 45 months. No doubt the fall in migration is a key factor. However more importantly the lower growth rate means that the employment hurdle rate will fall – i.e. fewer jobs have to be created on a monthly basis to ensure the unemployment rate continues to fall.
• It is important to highlight that the data is backward looking, capturing how the economy was tracking around 4-5 months ago. The more forward looking indicators like the job ads series suggest that while employment growth will remain a feature it is likely to be a less robust in the near term.
• There are always plenty of quirks in the data and one of the more notable was the sharp jump in Tasmanian unemployment from 5.1 per cent to 6.4 per cent despite employment rising by 600 workers. Hard to blame the Queensland floods for that.
• The ABS noted: “Due to flooding in Queensland, operational difficulties were experienced in conducting the Labour Force Survey in January 2011. Due to the sample loss noted above, there will be increased volatility in the Queensland estimates, particularly in the original and seasonally adjusted estimates. Given increased volatility, the ABS continues to encourage users to focus on trend estimates in monitoring the underlying level of series.”

What do the figures show?

Labour force

• Employment rose for the eleventh straight month in January, lifting by 24,000 workers. Full-time employment fell by 8,000 after rising by 200 in December. Part-time employment rose by 32,000 after rising by 1,600 in December.
• The annual employment growth rate eased from 3.3 per cent to 3.2 per cent.
• The unemployment rate remained steady at 5.0 per cent. The participation rate rose from 65.8 per cent to 65.9 per cent.

• Average hours worked fell by 0.8 per cent in January but rose by 2.6 per cent over the year.
• Victoria (up 17,800) led the job gains in January, followed by Western Australia (up 3,200), Tasmania (up 600), ACT (up 500), NSW (up 100). Employment fell 5,100 in Queensland followed by South Australia (down 400) and Northern Territory (down 300).
• Across the states and territories unemployment rates in January were: NSW 4.9 per cent (4.6 per cent in December); Victoria 5.1 per cent (4.9 per cent); Queensland 5.6 per cent (6.0 per cent); South Australia 5.3 per cent (5.6 per cent); Western Australia 4.6 per cent (4.4 per cent); Tasmania 6.4 per cent (5.1 per cent); Northern Territory 2.3 per cent (2.4 per cent); ACT 3.4 per cent (3.3 per cent).
• The working age population rose by 19,000 in January after lifting by 19,700 in December. The working age population grew by 1.93 per cent over the past year – the smallest gain in 45 months.

What is the importance of the economic data?

• 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 for interest rates and investors?

• CommSec expects the jobless rate to ease to around 4.5 per cent over the coming year. But if the Federal Government was to provide a much needed boost to labour supply by lifting the migrant intake and easing work visa restrictions, the job market may not need to tighten as much as expected.
• The Federal Government now needs to give consideration to increasing labour supply (migration) to prevent inflationary pressures from emerging. Looking forward, productivity and migration need to lift to prevent inflationary pressures from developing
• We don’t expect the Reserve Bank to touch official interest rates until at least May 2011.
• It is understandable that employment growth is likely to moderate over the next couple of months. The rapid fire rate hikes and sluggish consumer activity is starting to show cracks in the labour market data. Overall the lack of consumer spending, a consolidating housing market, coupled with sectors like manufacturing, services and construction going backwards will keep businesses on the sidelines.
• We expect the job market to remain relatively healthy particularly in the second half of the year. However the job market may trend sideways for the next couple of months. Our equity media analysts maintain their hold rating on SEEK Limited.

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• Employment rose by 54,600 in November, well above forecasts centred on job gains of around 20,000 (range from +5,000 to +35,000 jobs). The October result was revised up to show job growth of 36,900
  (previously showed a rise of 29,700). Full-time employment rose by 55,100 (October jobs were down by 7,600) and part-time jobs fell by 400 (October jobs rose by 44,500).
• The unemployment rate fell from 5.4 per cent to 5.2 per cent. The participation rate rose from 65.9 per cent to a record high of 66.1 per cent. The working age population rose by 20,100.
• Average hours worked were largely flat (up 0.04 per cent) in November but were up by 3.1 per cent over the year.
• Across the states and territories unemployment rates in November were: NSW 5.1 per cent (5.4 per cent in October); Victoria 5.5 per cent (5.6 per cent); Queensland 5.5 per cent (5.6 per cent); South Australia 5.6 per cent (5.7 per cent); Western Australia 4.5 per cent (4.7 per cent); Tasmania 5.4 per cent (5.2 per cent); Northern Territory 3.1 per cent (3.1 per cent); ACT 3.1 per cent (3.1 per cent).

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