The labour force survey beat all expectations. The unemployment rate, rather than remaining at 6.2 percent, declined to 5.9 percent. At the same time, the participation rate increased to 65.0 percent from 64.9 percent where it had been expected to remain. And employment rather than increasing 15,000 soared 58,600. It is the first time the jobless rate has been below 6 percent since May 2014.
The gain in employment was driven by increases in full-time employment (up 40,000) and part time employment (up 18,000). The seasonally adjusted number of people unemployed decreased by 33,400 to 739,500 in October.
Reserve Bank of Australia's Governor Glenn Stevens had been rather sanguine in last week's monetary policy statement about economic conditions, indicating that the RBA's 2 percent interest rate was fine for now.
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.