Australian labour market data for January released today showed conditions were relatively steady, with little change in employment, a small increase in the unemployment rate, and no change in the participation rate. Officials noted, however, that a higher-than-usual number of people who were not employed or in the labour force in January said they would be starting or returning to work in the near future.

These shifts in seasonal patterns suggest that the near-zero employment growth and the increase in the unemployment rate in January are not necessarily evidence that underlying conditions in the labour market have weakened. Officials instead suggest that work patterns during the summer holiday period have changed since the COVID-19 pandemic, making it more difficult for statisticians to make appropriate seasonal adjustments to the data.

The number of employed persons in Australia rose by just 500 persons in January after falling by 65,100 persons in December. The consensus forecast, in contrast, was for a bigger increase of 30,000 persons. Full-time employment increased by 11,100 persons after a previous decline of 106,600 persons, while part-time employment fell by 10,600 persons after increasing by 41,400 previously. Hours worked fell sharply, down 2.5 percent on the month after dropping 0.2 percent previously, with officials noting this also appears to reflect changing seasonal patterns in the amount of annual leave workers take in January.

Today's data also show the unemployment rate increased from 3.9 percent in December to 4.1 percent in January, its highest level in two years. The participation rate was unchanged at 66.8 percent, remaining close to record highs. Officials estimate that 23,400 people who were classified as unemployed in January are waiting to start employment and that another 86,800 people who are waiting to start work were not classified as part of the labour force. Officials estimate that the unemployment rate would haver been unchanged at 3.9 percent if normal seasonal patterns had occurred in January.

At a consensus rise of 30,000, employment in January is expected to rebound from December's unexpected 65,100 fall. Unemployment is expected to rise a tenth to 4.0 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.