AU: Labour Force Survey


Wed Feb 11 18:30:00 CST 2015

Consensus Actual Previous Revised
Unemployment 6.2% 6.4% 6.1% 6.1%
Employment -5,000 -12,200 37,400 42,400
Participation Rate 64.8% 64.8% 64.8%

Highlights
January's report missed estimates of both employment and unemployment. Employment was expected to decline 5,000. Instead employment dropped 12,200. The unemployment rate was expected to edge up to 6.2 percent but registered an increase to 6.4 percent. The seasonally adjusted labour force participation rate remained at 64.8 percent in January as expected however. There was a bright spot in December employment was revised upwards from 37,400 to 42,300.

The number of people employed decreased by 12,200 to 11,668,700 in January 2015 (seasonally adjusted). The decrease in employment was driven by a decline in full time employment. The decline in full time employment was partly offset by an increase in part time employment, up 17,800. The seasonally adjusted number of people unemployed increased by 34,500 to 795,200.

The December results had provoked comment as an improving jobs picture seemed incongruous with a slowdown in the economy. Methodological changes over recent months have raised question marks over the accuracy of the data, and have prompted the ABS to launch an independent review of the changes and make several revisions to previously published data in recent months.

Definition
The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labor force.

Description
This report is used as an indicator of the health of the domestic economy. Employment trends highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.

The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.

The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.

The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.