AU: Labour Force Survey

June 14, 2017 08:30 CDT

Consensus Actual Previous Revised
Unemployment 5.7% 5.5% 5.7%
Employment 10,000 42,000 37,400 46,100
Participation Rate 64.9% 64.8%

Australia's labour market saw an increase of 42,000 in the number of employed persons in May (seasonally adjusted) after increasing by 46,100 in April (revised up from 37,400). This was well above the consensus forecast for an increase of 10,000. The unemployment rate fell from 5.7 percent to 5.5 percent, while the participation rate rose from 64.8 percent to 64.9 percent.

The increase in headline employment in May was entirely driven by full-time jobs, which increased by 52,100 after a decline of 5,700 in April. Part-time jobs fell by 10,100 in May, partly reversing the strong increase of 51,900 recorded in April. Over the last twelve months, seasonally-adjusted full-time employment has increased by 148,000 persons, while part-time employment has increased by 84,800 persons.

The number of people looking for work fell by 18,600 in May with the unemployment rate, at 5.5 percent, now at its lowest level since early 2013. The participation rate is also at its higher level since last July, extending its recent strong upward trend.

In recent commentary on the domestic labour market, officials at the Reserve Bank of Australia have noted that growth in total hours worked has been weak despite an improvement in employment growth. This month's boost to full-time employment, however, has resulted in an increase in hours worked of 1.9 percent in May, the strongest month-on-month growth 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.