AU: Labour Force Survey

January 18, 2017 06:30 CST

Consensus Actual Previous
Unemployment 5.7% 5.8% 5.7%
Employment 12,500 13,500 39,100
Participation Rate 64.6% 64.7% 64.6%

December employment increased by 13,500, somewhat more than the 12,500 expected. Full time employment increased 9,300 while part time employment was up 4,200. This was the third month that full time jobs have driven the employment increase. Since December 2015, seasonally adjusted employment was up 91,500. However, the gains in full time employment were not reflected in the full 2016 totals. Full time employment declined by 34,000 persons while part time employment increased by 125,500 persons.

The unemployment rate edged up to 5.8 percent from 5.7 percent reflecting an increase in the participation rate to 64.7 percent from 64.6 percent as more people looked for employment. The seasonally adjusted employment to population ratio decreased by less than 0.1 percentage points to 60.9 percent in December 2016. Over the past 12 months, the employment to population ratio decreased by 0.4 percentage points.

The Reserve Bank of Australia has 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.

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.