Australian Employment Change: Limited reversion to trend

• New employment expected to recover in March, but remain weak by recent standards
• February had seen the smallest addition since last September

The Australian Bureau of Statistics will release its Employment Change Report at 11:30 am AEST, 1:30am GMT, April 18th, 9:30 pm EDT April 17th. 

Forecast

The employment change is expected to add 12,000 new positions in March after February’s 4,600 and the January total of 39,100.  The unemployment rate is predicted to rise to 5.0% from 4.9% in February. 

Employment Change

The sharp February drop in job creation to 4,600 brought it well below the 14,000 forecast, the three month moving average in January of 33,400 and the 12-month average of 23,000. A return to 12,000 would leave the two month average at its lowest point since February and March of last year. 

Full-time employment shed 7,300 posts in February after the January surge of 65,400.  Part-time work gained 11,900 jobs subsequent to the January decline of 26,300.  The participation rate for the labor force was 65.6% in February and has been bouncing 0.1% higher then lower since November. The recent low was 65.4% last September and the high was 65.8% in January 2018.

Reuters

Despite the occasional volatility in job numbers the overall labor picture has been quite positive. For the past 18 months the annual moving average has varied from 35,800 in January 2018 to 23,100 a year later.  The unemployment rate has seen steady improvement over the last four years, falling from 6.4% in October 2014 to its current 4.9% matching the 10-year low.

The Reserve Bank of Australia (RBA) has forecast an unemployment rate of 5.0% for 2019 with the caveat that a lower rate would be necessary to impel sufficient wage increase to move inflation towards the bank’s 2.0% midpoint target.   The consumer price index was at 1.8% in the fourth quarter last year and is expected to drop to 1.5% in the first three months of this year.  

Reuters

A long term decline in job creation would probably not on its own push the RBA to a change in policy.  The RBA’s cash rate has been at 1.5% since the middle of 2016. But given the exposure of Australia’s resource based economy to global risks, particularly the general slowdown in growth and the still unresolved US-China trade dispute a modicum of rate insurance is not unthinkable if the labor market falters.

Reuters

However, neither the RBA cash rate or the three figure range of the Australian Dollar since last October is likely to change until there is a resolution in the negotiations between Washington and Beijing, the most important global economic topic bar none.