Labour market conditions in Australia weakened moderately in March, with employment falling after two consecutive increases, the unemployment rate picking up slightly, and the participation rate falling slightly. Nevertheless, labour market conditions remain relatively tight and today's data will likely do little to shift the focus of the Reserve Bank of Australia from the inflation outlook or strengthen the case for any easing in policy in the near-term.

The number of employed persons in Australia fell by 6,600 persons in March after surging by 116,500 in February. The consensus forecast was for an increase of 5,000. Full-time employment increased by 27,900 after a previous increase of 78,200, but this was offset by a fall in part-time employment of 34,500 after a previous increase of 38,300. Hours worked increased 0.9 percent on the month after surging 2.8 percent previously.

Today's data also show the unemployment rate rose from 3.7 percent in February to 3.8 percent in March. The participation rate fell slightly from 66.7 percent to 66.6 percent, remaining close to record highs.

Following February's much greater-than-expected increase of 116,500 that reflected both underlying strength as well as a shift in seasonal patterns, employment in March is expected to rise a further but modest 5,000. Unemployment is expected to rise to 3.9 percent from 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.