AU: Labour Force Survey

Wed Jan 17 18:30:00 CST 2018

Consensus Actual Previous Revised
Unemployment 5.4% 5.5% 5.4%
Employment 15,000 34,700 61,600 63,600
Participation Rate 65.4% 65.7% 65.5%

Australia's labour market saw an increase of 34,700 in the number of employed persons in December (seasonally adjusted), down from a revised increase of 63,600 in November and above the consensus forecast for an increase of 15,000. The unemployment rate rose from 5.4 percent in November to 5.5 percent in December, just above the consensus forecast, while the participation rate advanced from 65.5 percent to 65.7 percent, above the consensus forecast of 65.4 percent.

The increase in headline employment in December reflects gains on both full-time and part-time employment. Full-time jobs grew by 15,100, down from an increase in 43,600 in November, while part-time jobs grew by 19,500, little changed from the increase of 20,000 the previous month. The total number of hours worked in the month declined by 0.2 percent in December after an increase of 0.6 percent in November. Seasonally-adjusted full-time employment increased by 303,000 persons over 2017, while part-time employment increased by 100,000 persons.

The number of people looking for work rose by 20,500 in December, with the unemployment rate, at 5.5 percent, picking up slightly from multi-year low recorded in November. The solid increase in the participation rate takes it to its highest level since 2010 and provides strong evidence that conditions in the labour market remain positive.

Today's data also remain consistent with the assessment of labour market conditions made by the Reserve Bank of Australia at its most recent policy meeting held last month, with officials noting then that "various forward-looking indicators continue to point to solid growth in employment over the period ahead". Officials, however, also expect that this strength in employment growth will result in only a gradual pick-up in wage pressures over the forecast period, reinforcing their view that headline inflation is also likely to pick up only gradually.

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.