AU: Labour Force Survey

Wed Nov 15 18:30:00 CST 2017

Consensus Actual Previous Revised
Unemployment 5.5% 5.4% 5.5%
Employment 20,000 3,700 19,800 26,600
Participation Rate 65.2% 65.1% 65.2%

Australia's labour market saw an increase of 3,700 in the number of employed persons in October (seasonally adjusted), well down from a revised increase of 26,600 in September and falling short of the consensus forecast for an increase of 20,000. This is the weakest monthly result since payrolls fell for two consecutive months in August and September of 2016. The unemployment rate fell from 5.5 percent in September to 5.4 percent in October, just below the consensus forecast of 5.5 percent, while the participation rate fell from 65.2 percent to 65.1 percent, also just below the consensus forecast of 65.2 percent.

The increase in headline employment in October was driven full-time jobs, which increased by 24,300 after growing by 9,300 persons in September. Part-time employment fell by 20,700 persons in October, more than reversing an increase of 17,300 persons recorded in September. The total number of hours worked in October increased by 0.3 percent, down from an increase of 0.7 percent in September. Over the last twelve months, seasonally-adjusted full-time employment has increased by 297,900 persons, while part-time employment has increased by 57,800 persons.

The number of people looking for work fell by 8,100 in September, with the unemployment rate, at 5.4 percent, is at its lowest level since February 2013. The drop in the participation rate still leaves it close to its highest highest level since 2011.

Today's data follows the release earlier this week of data showing that that the wage price index rose 0.5 percent on the quarter and 2.0 percent on the year in the three months to September. Officials at the Reserve Bank of Australia expect wage growth to pick up only gradually over the forecast period and last week revised down their medium-term forecasts for consumer price inflation. Underlying inflation is now expected to remain below the RBA's target range of 2.0 percent to 3.0 percent until early 2019, and officials caution that inflation may fall short of their forecasts if wage growth does not pick up as they anticipate.

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.