Labour market conditions in Australia strengthened further in September, with employment recording an increase well above the consensus forecast and the unemployment and participation rates continuing to indicate very tight conditions. This strength will likely keep the focus of the Reserve Bank of Australia on risks to the inflation outlook.

The number of people employed in Australia rose by 64,100 in September, up from an increase of 42,600 in August and well above the consensus forecast for an increase of 23,700. Full-time employment rebounded with an increase of 51,600 persons after dropping 3,100 last month, while part-time employment rose by 12,500 persons after a previous increase of 50,600 persons. Hours worked rose 0.3 percent on the month after a previous increase of 0.4 percent.

Today's data also show the unemployment rate fell from 4.2 percent in August to 4.1 percent in September. The participation rate rose from 67.1 to a new record high of 67.2 percent.

Australia employment is expected to rise 24,000 on the month after August's strong rise of 47,500. The unemployment rate is expected to hold steady at 4.2 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.