AU: Labour Force Survey

Wed Apr 15 20:30:00 CDT 2015

Consensus Actual Previous Revised
Unemployment 6.3% 6.1% 6.3% 6.2%
Employment 15,000 37,700 15,600 42,000
Participation Rate 64.6% 64.8% 64.6% 64.7%

March labour force survey was much stronger than anticipated. Unemployment slipped to just 6.1 percent from a downwardly revised 6.2 percent in February. Employment was up a greater than expected 37,700 to 11,720,300. The improved employment picture was driven by an increase in full time employment which was up 31,500. The remaining 6,100 jobs that were created were part time positions. A 15,600 gain in February was revised up - way up - to 42,000.

The number of people unemployed decreased by 1,500 to 764,500 resulting in the declining rate. The seasonally adjusted labour force participation rate increased to 64.8 percent in March 2015 from a revised 64.7 percent in February 2015.

This report will put into question whether the Reserve Bank of Australia will cut its cash rate when it meets the beginning of May.

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.

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.