Australia: A robust labour market update but don’t get over excited - Westpac

Justin Smirk, Research Analyst at Westpac, notes that Australia’s total employment rose 61.6k compared the market’s 19k forecast and Westpac's +25k. In the month unemployment was flat at 5.4% (5.40% at two decimal places vs. 5.39% in Oct) with a 0.3ppt gain participation driving 65.7k surge in the labour force, he further adds.

Key Quotes

“This was the 14th consecutive gain monthly gain in employment matching the historical second longest period of monthly gains which started Aug 1979. The longest period of consecutive employment gains is 15 months starting May 1993.”

“The Australian labour market has gathered momentum through 2018 with annual employment growth accelerating from 0.9%yr in Feb to the Nov peak of 3.2%yr. In the year to Nov total employment has grown 383.3k.”

“In 2017 the employment gains have been focused in full-time employment. Full-time employment rose 41.9k taking the total in the year to 304.6k or a 3.7%yr pace. Part-time employment rose 19.7k to be up 78.7k/2.1%yr.”

“A further positive is the decline in the underemployment from 8.5% in Aug to 8.3% in Nov (the seasonally adjusted estimate is only released quarterly). This is indicative of an overall improvement in the labour market and possible upwards pressure in wages. However, at this stage we are yet to see any significant increase in wage inflation and underemployment continues to lag the improvement in the unemployment rate and the surge in hours worked.”

“However, youth unemployment bounced and at 12.4% it is almost back to the Sep level. It does look as if the improvement in youth unemployment we have seen through 2017 may have stalled.”

“November’s employment gain exceeded expectations but we would caution before thinking this represents an acceleration in labour demand. The weaker than expected Oct print was associated with a falling participation pointing to sample volatility behind that soft print and so a statistical recovery in Nov was possible. That is what happened and in the Nov survey the ABS notes that the incoming rotation group had a higher employment to population ratio than both the group it replaced and the entire sample. As such, sample volatility would explain a fair proportion of both the rise in employment and participation.”