AU: Labour Force Survey

Wed Mar 21 19:30:00 CDT 2018

Consensus Actual Previous Revised
Unemployment 5.5% 5.6% 5.5%
Employment 20,000 17,500 16,000 12,500
Participation Rate 65.6% 65.7% 65.6%

Australia's labour market saw an increase of 17,500 in the number of employed persons in February (seasonally adjusted), up from a revised increase of 12,500 in January but falling short of the consensus forecast for an increase of 20,000. The unemployment rate rose from 5.5 percent in January to 5.6 percent in February, just above the consensus forecast of 5.5 percent, while the participation rate advanced from 65.6 percent to 65.7 percent, just above the consensus forecast of 65.6 percent.

The increase in headline employment in February reflects a strong rebound in full-time employment, up 64,900 on the month after fall of 53,200 in January. This was largely offset by a fall in part-time employment of 47,400 after an increase of 65,900 previously. The total numbers of hours worked in February increased 1.2 percent on the month in January after dropping 1.3 percent in January. Over the last twelve months, full-time employment has increased by 327,600 persons, while part-time employment has increased by 93,100 persons.

Today's data show labour market conditions remain strong, with the participation rate just short of a record high of 65.8 recorded in 2010. Officials at the Reserve Bank of Australia expect employment to keep expanding in 2018 but also forecast that wage pressures will likely pick up only gradually over the forecast period, reinforcing their view that headline inflation is also likely to increase 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.