AU: Labour Force Survey

Wed Apr 13 20:30:00 CDT 2016

Consensus Actual Previous
Unemployment 5.9% 5.7% 5.8%
Employment 18,600 26,100 300
Participation Rate 65.0% 64.9% 64.9%

The labour market improved in March. Seasonally adjusted employment increased 26,100. At the same time, the number of persons unemployed decreased by 7,300. The seasonally adjusted unemployment rate was 5.7 percent (down 0.1 percentage point from February) beating expectations while the labour force participation rate remained at 64.9 percent. The unemployment rate is at its lowest since September 2013. Part time employment accounted for the entire increase gaining 34,900 jobs while full time employment declined 9,000. The employment to population ratio increased by less than 0.1 percentage point to 61.2 percent in March 2016.

The better than expected data is likely to dim expectations that the Reserve Bank of Australia will plump for more easing at its next monetary policy meeting on May 3, although economists have questioned the accuracy of jobs data in recent months amid persistent volatility and sharp revisions.

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.