Australia: Surge in employment is overstating the momentum in the labour market - Westpac

In Australia, the November surge in employment is overstating the momentum in the labour market as in spite of being a robust market it is more likely that the flat unemployment rate is a better indicator of overall labour market conditions, according to analysts at Westpac.

Key Quotes

“A robust update but don’t get over excited

• Total employment rose by 61.6k in November, well above both the market’s (+19k) and Westpac’s (+25k) expectations with a small upwards revision to October (to 7.8k from 3.7k). But most notably, despite the surge in employment the unemployment rate was flat at 5.4% as a 3ppt surge in participation boosted the labour force and offsetting the rise in employment. In the year total employment has gained 383k or 3.2%.
• The surge in employment was also seen in the solid gain for full-time employment (+41.9k) and a robust 0.6% bump in hours worked. In the year full-time employment has gained 304.6k while total hours worked has surged 4.0%yr.
• There has also been a moderation in the underemployment rate, from 8.5% in Aug to 8.3% in Nov (the seasonally adjusted number is only released quarterly). However, it does remain at a historicall elevated level and youth unemployment continued to rise hitting 12.4% in November, up from 12.1% in October.”

“Flat unemployment suggests a robust labour market

• In summary, November’s headline employment gain exceeded expectations by a significant margin but we would caution before interpret this as suggesting an acceleration in labour demand. As we highlighted in our preview, the weaker than expected October print associated with a falling participation suggested that sample volatility may have been behind the soft print. As such, a bounce back in November employment and participation was to be expected. In the end the robust surge in employment, and 0.2ppt gain in participation, does suggest that positive sample volatility may have been a significant factor this month. This is why we would point to the flat unemployment rate which suggests that the labour market that is holding a robust level rather than strengthening at this point.”