Labour market conditions in Australia remained strong in January, with employment increasing for the tenth consecutive month and the unemployment and participation rates continuing to indicate very tight conditions. Although the Reserve Bank of Australia cut policy rates earlier this week, this ongoing strength in the labour market will likely keep the focus of officials on risks to the inflation outlook.

The number of people employed in Australia rose by 44,000 in January, moderating from 56,300 in December but well above the consensus forecast for an increase of 20,000. Full-time employment rose by 54,100 persons after a previous decline of 23,700 persons, while part-time employment fell by 10,000 persons after surging by 80,000 persons over the holiday period. Hours worked fell 0.4 percent on the month after an increase of 0.5 percent previously.

Today's data also show the unemployment rate rose from 4.0 percent in December to 4.1 percent in January. The participation rate rose from 67.1 percent to 67.3 percent, a new record high.

Job growth in Australia in January is expected to show a 20,000 increase on the month. The jobless rate is expected to tick up to 4.1 percent from 4.0 percent in December.

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.