Australia: Solid update with robust gains in full-time employment - Westpac

It was a solid update from the Australian June Labour Force survey as the 14k gain was on market expectations and only modestly less than our 20k forecast, explains Justin Smirk, Research Analyst at Westpac.

Key Quotes

“This gain holds the annual pace a 2% which is consistent with our broad indicator of labour demand – Westpac’s Jobs Index. We should note that the Jobs Index is pointing to employment growth accelerating through to mid Q4. We are not looking for a slowdown in employment growth until year end or early 2018.”

“In June, total employment rose 14.0k for a 101.2k total gain over the last three months or an average of 33.7k per month. The annual pace of employment growth has lifted from 0.9%yr in February to 2.0%yr in May and it held that pace in June. In the year to Feb there was a 106.9k gain in employment; in the year to June this has lifted to 240.2k. 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. We have clearly bounced out of this soft patch and now holding a firmer trend.”

“There was the usual volatility in full-time/part-time employment but over the past few months the results are more indicative of a robust labour market. Full-time employment rose 62.0k following on from a solid 53.4k gain in May. In the year full-time employment gained 175.4k for a 2.1%yr pace which sees the pace of full-time employment growth now exceeding the pace of growth in the working age population. Part-time employment fell 48.0k following a –15.4k in May. In the year to June, part-time employment has lifted 64.8k and at 1.7%yr pace it is the first time since March 2015 that the annual pace of part-time employment growth has been slower than that for full-time employment.”

“A further sign of the overall strength of this report was the 0.5% lift in hours worked following the 1.7%mth jump in May. The annual pace for total hours worked lifted to 3.3%yr which is the fastest pace seen since December 2015.”

“The reported gain in employment was also associated with a 0.1ppt lift in participation to 65.0 which saw a 27.1k gain in the labour force thus holding the unemployment flat at 5.6% (at two decimal places the unemployment rate was 5.65% from 5.56% in May so it was a smidgin off being rounded up to 5.7%). We believe we have seen the low point for unemployment in this cycle and expect it to hold around 5.6% until it starts to drift higher from end 2017.”

“Last month we reported a promising decline in youth unemployment; in June youth unemployment rose to 13.1% from 12.7%, back close to where it was in March.”

“By state, there were solid gains in NSW (+3.6k), Vic (+3.7k), SA (4.6k) and WA (6.9k). The only mainland state to report a decline was Qld (–1.0k). This saw a flat unemployment rate in NSW (4.8%) a fall in Vic (5.9% from 6.0%) and SA (6.6% from 6.9%) while the unemployment rate lifted in Qld (6.5% from 6.1%) and WA (5.6% from 5.5%).”

“All up this was positive update on the labour market following the robust trend sent by the leading indicators. While we still expect the monthly numbers to be quite volatile, the Jobs is pointing to total employment growth could hit 2¼% by year’s end. This estimate is now looking far more plausible.”