Australia: Robust May Labour Force survey - Westpac

It was a solid update from Australian May lobour force survey and while most of the employment gains were in NSW, all other mainland states had a sound report with positive employment and falling unemployment, explains Justin Smirk, Research Analyst at Westpac.

Key Quotes

“This was a robust update from the May Labour Force survey. The much stronger than trend gain in employment was something that our Jobs Index has been pointing to for some time but given the historical volatility in the Labour Force Survey, and the more recent issues regarding changes made to the March/April/May surveys, we were not confident this strength would come through so soon even thought our forecasts for the next few months did incorporate such a recovery.”

“In May, total employment rose 42k for a 141.1k total gain over the last three months or an average of 47k per month. In the last three months the annual pace has lifted from 0.9%yr in February to 2.0%yr in May. Compare this to the 106.k gain, or 0.9%yr, in the year to February. The Australian labour market went through a soft patch in 2016 that was particularly pronounced through August to November when the average gain in employment per month was a paltry 2.2k. So far in 2016 the labour market has bounced out of that soft patch.”

“This solid gain in employment was also associated with a 0.1ppt lift in participation to 64.9 which saw a 23.4k gain in the labour force limiting the fall in the unemployment rate to 5.5% from 5.6% - at two decimal places the unemployment rate was 5.53%. We had been looking for the unemployment rate to fall over the next few months but had not expected it to get to 5.5% so soon.”

“There was the usual switching volatility in full-time/part-time employment. Full-time employment rose 52.1k following on from a -5.7k fall in April. In the year full-time employment gained 148k rising at a 1.8yr pace. Full-time employment growth is now exceeding the pace of growth in the working age population, the first time it has done so since February 2016. Part-time employment fell -10.1k but this followed an outsized 51.0k bump in April. In the year to May, part-time employment has lifted 48k but it continues to outpace full-time employment growth rising 2.2%yr.”

“By state, every mainland state reported a fall in unemployment except for NSW where the unemployment rate lifted 0.1ppt to 4.8% which is still well under the national average. In this case the rise in unemployment was due to a 0.5ppt rise in the participation rate as employment grew a solid 32.6k in the month. In turn it is worth noting that the bump in participation in NSW was mostly due to a 0.8ppt surge in female participation in that state. By comparison total employment rose 6.9k in Vic, 5.4k in Qld, 5.2k in SA and 4.3k in WA.”

“Further signs of the overall strength of this report was the 1.9%mth jump in hours worked taking the annual pace to 2.3yr; the 0.1ppt decline in youth unemployment to 12.7%; and, the 0.1ppt drop in the underemployment rate to 8.8%.”

“All up this is a very positive update on the labour market and while we still expect the monthly number to be quite volatile, the Jobs Index suggestion that total employment growth could hit 2¼% to 2½% by year’s end is now looking farm more plausible.”