Australian labour market data for January released today showed a fall in headline employment and hours worked, an increase in the unemployment rate, and a small fall in participation. Officials noted that some seasonal patterns seen in January were more pronounced than typical, with an unusually large number of people both leaving positions and indicating that they will soon be starting in new positions.

The number of employed persons in Australia fell by 11,500 pesons in January after a decline of 14,600 persons in December, well below the consensus forecast for an increase of 20,000. Full-time employment fell by 42,300 persons after increasing by 17,600 persons previously, while there was an increase of 31,800 persons in part-time employment after a previous decline of 32,200 persons. Work hours fell 2.1 percent on the month after dropping 0.5 percent previously, with officials noting that an unusually large number of people took annual leave in January this year.

Today's data show the unemployment rate rose from 3.5 percent in December to 3.7 percent in January, above the consensus forecast of 3.5 percent and its highest level since May 2022. The participation rate fell from 66.6 percent to 66.5 but remains at a historically high level. RBA officials expect tightness in the labour market to persist throughout 2023, and this strength in labour market conditions will likely reinforce their view that further rate increases will be required over this period.

Employment is expected to remain strong and steady in January, rising an estimated 20,000 versus a 14,600 decline in December which was weaker than expected. The unemployment rate is expected to hold steady at 3.5 percent.

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.