AU: Labour Force Survey

Wed Jul 19 20:30:00 CDT 2017

Consensus Actual Previous Revised
Unemployment 5.5% 5.6% 5.5% 5.6%
Employment 15,000 14,100 42,000 38,000
Participation Rate 64.9% 65.0% 64.9%

Australia's labour market saw an increase of 14,100 in the number of employed persons in June (seasonally adjusted), down from a revised increase of 38,000 in May and falling short of the consensus forecast for an increase of 15,000. The unemployment rate was steady at 5.6 percent in June, just above the consensus forecast of 5.5 percent, while the participation rate rose slightly from 64.9 percent in May to 65.0 percent in June.

The increase in headline employment in June was driven by a strong increase in full-time jobs, outweighing a large decline in part-time jobs. Full-time employment increased by 62,000 persons in June, while part-time employment fell by 48,000. This shift in favour of full-time employment has resulted in the total number of hours worked increasing by 0.5 percent on the month in June. Over the last twelve months, seasonally-adjusted full-time employment has increased by 175,400 persons, while part-time employment has increased by 64,800 persons.

The number of people looking for work increased by 13,100 in June with the unemployment rate, at 5.6 percent, matching its lowest level since early 2013. The increase in the participation rate extends its recent strong upward trend and takes it to its highest level since the start of 2016.

In the minutes of their policy meting held earlier this month, officials at the Reserve Bank of Australia noted recent signs of improvement in the labour market, adding that this may lessen downside risks to their forecasts for wage growth. Today's data indicates that this improvement has continued.

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.