Labour market conditions in Australia weakened in August, with full-time employment falling sharply after a previous increase and participation rate falling. Reserve Bank of Australia officials noted that labour market conditions"remain a little tight" in the statement accompanying its decision to cut policy rates last month, but today's data may ease concerns about wage pressures.

The number of people employed in Australia fell by 5,400 persons in August after increasing by 26,500 persons in July, well below the consensus forecast for an increase of 22,000. This decline was driven by full-time employment, which fell by 40,900 persons after a previous increase of 63,600 persons. Full-time employment has oscillated between big declines and increases in the last four months. Part-time employment, in contrast, rose sharply, up 35,500 persons after a previous decline of 37,100 persons. Hours worked rose 0.1 percent on the month after advancing 0.3 percent previously.

Today's data also show the unemployment rate was steady at 4.2 percent in August, just below the recent high of 4.3 percent recorded in June. The participation rate fell to 66.8 percent from 67.0 percent.

Employment is expected up 22,000 on the month in August versus 25,000 in July. The unemployment rate is seen flat at 4.2 percent versus 4.2 percent in July.

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.