Australian labour market data for September released today showed a weaker-than-expected increase in employment, a small decline in the unemployment rate, and a drop in participation. Conditions in the labour market have been volatile since the Reserve Bank of Australia began a pause in policy tightening four months ago, but they remain relatively tight and will likely keep officials' focus on upside risks to the inflation outlook.

The number of employed persons in Australia rose by 6,700 persons in September after increasing by 64,900 persons in August, well below the consensus forecast for an increase of 20,000. Full-time employment fell by 39,900 persons after increasing by 2,800 persons, while part-time employment rose by 46,500 after increasing by 62,100 previously. Hours worked fell 0.4 percent on the month after falling 0.5 percent previously.

Today's data also show the unemployment rate fell from 3.7 percent in August to 3.6 percent in September, just below the consensus forecast of 3.7 percent. The participation rate fell from 67.0 percent to 66.7 percent.

At a consensus rise of 20,000, employment in September is expected to climb further following August's sharp 64,900 rebound. Unemployment is expected to hold at 3.7 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.