Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 18 February 2016

NSW & QLD are creating the jobs

Labour Force

The ABS released its all-important Labour Force data today for Janaury 2016. It is perhaps the most important of the data releases, so let's take a canter through it in the three short parts.

Part 1 - Employment growth

In seasonally adjusted terms, total employment declined by -7,900 in January to 11,894,500. In trend terms, total employment increased by +19,800.

Although this was a decline for the headline result which missed market expecations, given the strength of what has gone before, in context it wasn't too bad a result. 

In trend terms total employment increased by +302,500 over the past year or +2.6 per cent, which is a high rate of employment growth in historical terms. 

However, the composition of employment does not look quite so pretty, with full time employment decreasing by -40,600 in January, and part time employment increasing by +32,700. 

While full time jobs growth has been solid over the past year in rising by +2.0 per cent, the rate of part time jobs growth has been exceptionally high at +3.9 per cent. This probably represents a structural shift towards more casual jobs.

Total hours worked increased by a modest +2.0 per cent over the past year, perhaps a rather more realistic indicator of the strength of employment growth. 

Part 2 - NSW & QLD create the jobs

After some previously massive months of jobs growth, employment in New South Wales (and Victoria) pulled back in January, while Queensland went on to record further gains. 

Over the past six months the economy has created +143,400 jobs, with New South Wales (43 per cent) and Queensland (38 per cent) accounting for more than four-fifths of them.

Over the past year employment growth rates have ranged from an enormous +4.7 per cent in New South Wales and +3.3 per cent in Queensland, to a distinctly uninspiring -0.9 per cent in Tasmania. 

Part 3 - Unemployment rates converge

The headline result showed a seasonally adjusted increase in the unemployment rate to 6.0 per cent, which will excite the pessimists. However, the result was probably more middle of the road than anything.

The participation rate has crept up to 65.2 per cent, the highest level in nearly four years, and while the number of unemployed persons recorded is volatile, it was down by 2.6 per cent over the year.

The trend unemployment rate ticked down a notch to 5.8 per cent, for a 27 month low. 

At the state level the monthly figures were absolutely wild once again, lurching all over the place. The trend figures point towards convergence rather than divergence between the states, with New South Wales looking to be in the best nick on this measure. 

The wrap

The 95 per cent confidence interval figures provided by the ABS (which ranged from -66,500 to +55,700 for the month) serve as a reminder that as estimates the monthly data shouldn't be taken too literally.

The big picture suggests that although annual headline employment growth is high by historical standards, the quality of employment growth is underwhelming, with part time work and under-employment aplenty in evidence. 

As a result ongoing low wages growth is likely to be the order of the day due to the inherent level of slack in the workforce.

The employment figures weren't too bad on the whole, but notably Goldman Sachs is now forecasting interest rate cuts of 25 basis points in both May and July, so hold on to your hats.