AU: Labour Force Survey

Wed Aug 16 20:30:00 CDT 2017

Consensus Actual Previous Revised
Unemployment 5.6% 5.6% 5.6% 5.7%
Employment 20,000 27,900 14,100 20,000
Participation Rate 65.0% 65.1% 65.0%

Australia's labour market saw an increase of 27,900 in the number of employed persons in July (seasonally adjusted), up from the revised 20,000 increase recorded in June and exceeding the consensus forecast for an increase of 20,000. This is the tenth consecutive monthly increase in employment. The unemployment rate was steady at 5.6 percent in July, in line with the consensus forecast, while the participation rate rose slightly from to 65.1 percent from 65.0 percent in June, just above the consensus forecast of 65.0.

The increase in headline employment in July was driven entirely by part-time jobs, which increased by 48,200 persons in July. Full-time employment, however, fell by 20,300 persons, partly reversing the revised increase of 69,300 persons in June. This shift away from full-time to part-time jobs contributed to a month-on-month decline of 0.8 percent in the total number of hours worked in July. Over the last twelve months, seasonally-adjusted full-time employment has increased by 197,700 persons, while part-time employment has increased by 41,600 persons.

The number of people looking for work increased by 1,100 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.

Speaking last week, the Reserve Bank of Australia's Governor, Philip Lowe, described recent trends in labour market indicators as a "positive development" and predicted that the unemployment rate would gradually move lower. Today's data - showing another increase in jobs, a drop in the unemployment rate, and stronger labour force participation - is consistent with this positive assessment of labour market conditions and could reinforce officials' preference to keep policy rates on hold even though inflation pressures remain subdued.

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.