AU: Labour Force Survey

October 19, 2016 07:30 CDT

Consensus Actual Previous
Unemployment 5.7% 5.6% 5.6%
Employment 15,000 -9,800 -3,900
Participation Rate 64.8% 64.5% 64.7%

Australia's job market weakened in September, with the number of employed persons (on a seasonally adjusted basis) falling by 9,800, compared with the consensus forecast for a gain of 15,000. The unemployment rate was steady at 5.6 percent in September, the same rate as in August, a three year low, but this largely reflected a drop in the labour force participation rate from 64.7 to 64.5.

The number of full-time jobs fell by 53,000 in September, the largest monthly fall since April 2011. This was offset by an increase of 43,200 part-time jobs, partly unwinding a fall of 18,600 part-time jobs in August. Total hours worked rose by 0.2 percent in September, after falling by 0.2 percent in August. Since the start of this year the number of part-time jobs has increased by around 163,000, but the number of full-time jobs has fallen by around 112,000.

The number of unemployed persons fell by around 12,500 in September, reflecting around 5,000 fewer unemployed persons looking for part-time work, and around 7,500 fewer unemployed persons looking for full-time work. This drop in the unemployment rate, however, largely reflects lower participation, with the number of people in the labour force (that is employed or looking for work) dropping by over 22,000 persons in September. At 64.5 percent, the participation rate is now at its lowest level since May 2014.

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.