AU: Labour Force Survey

December 14, 2016 06:30 CST

Consensus Actual Previous Revised
Unemployment 5.6% 5.7% 5.6%
Employment 20,000 39,100 9,800 15,200
Participation Rate 64.5% 64.6% 64.4%

Australia's job market recorded better-than-expected job gains in November, with the number of employed persons (on a seasonally adjusted basis) increasing by 39,100 after increasing by 15,200 in October (revised from 9,800), well above the consensus forecast for an increase of 20,000. The unemployment rate increased to 5.7 percent in November from 5.6 percent in October, a three year low, while the labour force participation rate rose from 64.4 to 64.6

For the second consecutive month, full-time jobs drove the increase in headline employment. The number of persons employed full-time rose by 39,300 in November after increasing by 45,700 in October. This follows sharp falls in full-time employment seen in September and July. Part-time employment, meanwhile, was virtually unchanged in November, falling by just 200 persons, after a drop of 31,700 in October and big increases in September and August. These latest moves have partly reversed the recent shift from full-time to part-time employment, though the trend remains broadly intact. Since the start of the year, seasonally-adjust full-time employment has fallen by 45,800 persons, while part-time employment has risen by 126,500 persons.

The number of unemployed persons rose by around 17,000 in November, pushing the unemployment rate up to 5.7 percent. This was mainly driven by around 15,000 more people looking for full-time work, with the participation rate also increasing from a ten-year low of 64.4 percent to 64.6 percent. This may indicate greater confidence among job-seekers about employment prospects.

Although today's data shows that the unemployment rate remain relatively low and that the participation rate has picked up slightly, additional analysis published by officials shows that the rate of underemployment remains high. Since early 2015, the trend unemployment rate has fallen by 0.5 percentage points to 5.7 percent, but the trend underemployment rate has remained steady at a series record high of 8.5 percent.

Officials at the Reserve Bank of Australia have highlighted the high rate of underemployment as a factor indicating that Australia's labour market is not as strong as suggested by the unemployment rate. They have also noted that a lack of data about how many extra hours underemployed workers are seeking means that it is difficult to estimate how much spare capacity there is in the job market. Growth in total hours worked over the last year, however, has been relatively subdued, suggesting that labour market conditions currently are not putting significant upward pressure on inflation.

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.