Australia's job market was weaker than expected in August, with the number of employed persons (on a seasonally adjusted basis) falling by 3,900, compared with the consensus forecast for a gain of 15,000. A drop in labour force participation, however, helped the unemployment rate fall from 5.7 percent to 5.6 percent, a three year low and just below the consensus forecast of 5.7 percent.
The fall in headline employment was driven entirely by part-time jobs, which fell by 15,400 in August after increasing by around 70,000 in July. Full-time jobs increased by 11,500 in August, partly unwinding a fall of around 43,000 in July. Despite the shift from part-time to full-time employment seen in August, total hours worked fell by 0.2 percent on the month.
The sharp increase in part-time employment seen in July was partly driven by short-term hiring of workers for national elections held that month. Officials also referred to the hiring of temporary workers for the national census held in August but indicated that most of these workers had already been employed in another job, suggesting only a limited impact on headline employment.
The number of unemployed persons fell by 10,500, reflecting 25,400 fewer unemployed persons looking for part-time work, offset by 14,900 more unemployed persons looking for full-time work. The participation rate fell from 64.9 percent to 64.7 percent, its lowest level since January 2015.
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 labour 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.